Global Economic Weekly SurvAIval of the fattest

Global Economic Weekly SurvAIval of the fattest

Global Letter: SurvAIval of the fattest 14 August 2026

There is a common narrative floating in the market arguing that profits margins of S&P Economics 493 companies that are heavily investing in AI are not improving, which makes the AI Global boom unsustainable. In our view, profit margins are neither a necessary nor sufficient statistic to determine if the investment in AI is economically convenient. Companies may Table of Contents invest to preserve market share, which means end consumers are the ultimate Global Letter 2 beneficiaries as they end up paying lower prices. From the perspective of the AI US 2 ecosystem, rents accrue to those who have a combination of stronger market power, Euro area 2 fatter balance sheets, and own scare resources that cannot be easily commoditized UK 2

United States: AI capex is picking up steam China 2

AI capex is and should continue to be a tailwind for growth. Hyperscalers’ capex Emerging EMEA 2

estimates continue to get revised higher and should rise again in 2027. The investment Latin America 2 boom is generating positive second-order effects across the economy, i) through wealth Key forecasts 2 effects, and ii) by boosting manufacturing production and employment in AI-related Detailed forecasts 2 industries and data-center construction. Research Analysts 2

Euro Area: German industry – Defence to the rescue German manufacturing grew in 2Q, but gains remain concentrated in defence-exposed Claudio Irigoyen Global Economist sectors. Summer Rhine level headlines abound. We checked the data and still doubt this BofAS is a macro story, but select sectors, incl refineries, could be affected. Antonio Gabriel UK: Data preview – Core contained Global Economist BofAS Data once again will be examined to check if energy shock is feeding into persistent price pressures. We expect it not to- though headline inflation should rise, we don’t expect a notable rise in core price pressures. We expect BoE on prolonged hold. Global Economics Team BofAS

China: Oil import slump overstates demand weakness See Team Page for List of Analysts

China’s crude oil import slump overstates the weakness in domestic demand. Import volumes fell 13% yoy in the first seven months of the year, but refinery throughput, a better measure of crude use, declined a more modest 8%.

Emerging EMEA: Türkiye – Reserve constraints easing We estimate $33bn of net FX purchases by CBRT since June likely supported by tourism, returning inflows, and muted FX demand. With reserve pressures easing, the case for policy normalisation (with TLREF moving towards the 37%) has strengthened

Latin America: Brazil – Who is afraid of the big bad wolf? Brazil won't run out of cash - it has enough to fund itself into 2027. The real story is how expensive borrowing is getting. The big buyers walked away: for every R$100 of new long bonds, price-driven investors bought just R$4. Someone must pay up. Auctions look calm, but it's a mirage: Brazil is quietly selling less long-term debt and leaning on short, floating bonds.

*The Global Economic Weekly will return on September 4th.

BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 26 to 27.

Global Letter Claudio Irigoyen Antonio Gabriel Global Economist Global Economist BofAS BofAS

SurvAIval of the fattest Among the infinite number of questions the AI boom is raising, an important one is how to evaluate the benefits of investment in AI, both from the perspective of individual companies and for society at large. There is a common narrative floating in the market arguing that profits margins of S&P 493 companies that are heavily investing in AI are not improving or are even dropping, which makes the AI boom eventually unsustainable.

We take a different view and conclude that profit margins are neither a necessary nor a sufficient statistic to determine if the investment…