BofA says it is negative on European Equities and underweight on cyclicals vs. defensives; notes AI capex boom means market has reached unusually optimistic levels

House strategists turning negative on a whole regional index while citing AI capex optimism follows a familiar template: on previous occasions, sell-side calls framed around unusually elevated expectations have tended to be valuation arguments rather than catalyst calls, and valuation-only underweights have historically had a poor record of timing the turn, often running early for extended periods. The more actionable element is usually the relative leg rather than the outright one: cyclical-versus-defensive positioning in Europe is the part of the call that maps directly onto sector dispersion, whereas the top-down regional short competes with the trend-following flows that have typically dominated index-level price action. Strategists at large banks have form here, with house views on regional allocation frequently lagging the move they describe, and contrarian desks often treat clustered caution from multiple houses as a positioning tell in its own right. The reference to AI capex optimism echoes prior episodes where capex-cycle enthusiasm was the stated reason for caution, and those calls have tended to be vindicated only when the capex guidance itself rolled over, not when multiples looked stretched. Worth watching is whether peer houses adopt similar stances in coming weeks and whether the call is tied to any specific earnings or guidance trigger, since that is what has separated durable strategist calls from those quietly revised away.