For the first time, the "AI bubble" has become the foremost concern among credit investors, according to a recent survey conducted by Bank of America among its clients.

Strategists including Barnaby Martin noted in a Tuesday report that geopolitical tensions or central bank policy missteps are currently of little concern to most investors.

Among investment-grade respondents, 23% identified the risk of an AI bubble as their top worry, a significant increase from just 9% in the bank's previous survey conducted in December.

The survey revealed that fears over unsustainable surges in AI company investments and valuations have now surpassed "credit market bubbles" as the new leading risk. In previous years, trade tensions and a global economic downturn had also been viewed as major potential threats.

Investment-grade investors have raised their expectations for bond issuance from "hyperscale cloud providers" this year to $285 billion, up sharply from the $210 billion forecast in the December survey.

However, strategists noted that investors appear more relaxed about the potential for technology-driven disruption. Only 10% of respondents cited AI-driven corporate obsolescence as their primary concern.

They also indicated that fund inflows remain a key factor influencing credit spread levels and are sufficient to offset any bond market weakness stemming from AI-related risks.

The February survey included 54 of Bank of America's high-grade and high-yield clients, such as insurance companies, pension funds, and hedge funds.