Bank of America Sees 15% Euro Stoxx Drop by Q2 2026, Underweights Semiconductors
Bank of America projects a 15% decline in EURO STOXX 600 Futures by Q2 2026, warning consensus forecasts of 17% annual EPS growth ignore AI-driven obsolescence risks in insurance, asset management, and traditional software. The firm downgrades semiconductors to Underweight, reallocating to defensive staples like food and beverages, telecoms, and chemicals while keeping software Overweight.
1. Bearish Outlook on European Equities
Bank of America Global Research forecasts a 15% decline in EURO STOXX 600 Futures by the second quarter of 2026. Analysts argue that markets are overpricing a 17% annualized EPS growth rate, underestimating AI’s obsolescence risk for sectors such as insurance, asset management, and traditional software.
2. Semiconductor Downgrade and Defensive Shifts
The report officially downgrades the semiconductor sector to Underweight, citing concerns over AI capex overspending, high electricity costs, and elevated DRAM prices. Capital is recommended to rotate into defensive staples — food and beverages, telecoms, and chemicals — which are seen as more insulated from AI disruption.
3. Selective Software Overweight
Despite broader AI worries, software companies with proprietary data and deep customer integration are maintained at Overweight. For these firms, AI adoption is viewed as a defensive moat that can reinforce existing workflows rather than erode profit margins.