Bank of America recommends investors focus on defense contractors, infrastructure providers, and transition materials companies to gain indirect exposure to the AI boom while avoiding the volatility of pure-play AI stocks. The strategy targets sectors underpinned by long-term structural trends and government investment.
- Global AI-related capital spending to reach $1.2 trillion by 2028
- Defense AI spending projected to grow at 17% annually through 2030
- Infrastructure investment in AI-supporting systems to reach $470 billion by 2027
- Copper demand for AI infrastructure expected to increase by 28% by 2027
- Transition material suppliers to see average revenue growth of 14% annually over five years
- Recommended sectors show lower volatility and average dividend yields of 3.2%
Bank of America analysts have outlined a strategic approach to capitalizing on the artificial intelligence revolution without embracing the speculative risks associated with high-flying AI equities. Rather than investing directly in semiconductor or cloud infrastructure giants, the bank advises targeting companies involved in defense systems, national infrastructure upgrades, and materials critical to energy and digital transitions. These sectors, the analysts argue, are integral to AI’s physical and operational foundation. The recommendation is grounded in a forecast that global AI-related capital expenditures will reach $1.2 trillion by 2028, with 60% of that spending allocated to supporting infrastructure. Defense contractors such as Lockheed Martin and Raytheon Technologies are slated to benefit from AI integration in surveillance, logistics, and cyber operations, with projected defense AI spending growing at a 17% annual rate through 2030. Infrastructure firms like Caterpillar and Jacobs Engineering are positioned to gain from 5G expansion, data center construction, and smart grid modernization, expected to require $470 billion in investment by 2027. Transition materials—such as rare earth elements, copper, and silicon carbide—are also highlighted. Demand for these materials is anticipated to surge, with copper consumption for AI infrastructure alone projected to increase by 28% by 2027. Companies like Rio Tinto and BHP, which supply critical minerals, could see their revenues rise by 14% annually over the next five years due to AI-driven industrial demand. The strategy offers diversification and resilience amid market volatility. Unlike pure-play AI stocks, which have seen price swings exceeding 40% in single quarters, the recommended sectors have demonstrated lower beta and stronger dividend yields averaging 3.2%. Investors seeking exposure to AI’s growth trajectory while managing risk may find this approach more sustainable in the long term.