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Bank of America (BAC) shares fell on Wednesday even as the bank’s leadership raised profitability and growth targets during its first investor day in 14 years. The event, held in Boston’s Back Bay, was intended to reassure Wall Street that CEO Brian Moynihan can close the performance gap with rivals such as JPMorgan Chase and Wells Fargo.

The second-largest U.S. bank now targets a return on tangible common equity (ROTCE) between 16% and 18% over the next three to five years, up from 15.4% in the third quarter. The new range met analyst expectations but didn’t ignite enthusiasm—shares were down 1.7% in midday trading even as the S&P 500 rose 0.7%.

Performance Goals and Investor Reaction

Moynihan’s message was clear: responsible growth remains the bank’s north star, but profitability and efficiency will improve. Analysts, however, questioned the time horizon for results. UBS’s Erika Najarian said the longer timeline “raised early rumblings from investors.”

By comparison, JPMorgan Chase reported a 20% ROTCE in the third quarter—highlighting Bank of America’s continued lag behind its peers. Wells Fargo analyst Mike Mayo called the event a potential “sell-the-news” moment, noting the stock had rallied ahead of the meeting. Still, he expects higher earnings and returns to drive future gains.

Efficiency, Credit Quality, and Income Growth

Bank of America said it plans to lower its efficiency ratio—a key measure of profitability—to 55–59%, down from 62% in the third quarter. It also expects its net charge-off rate to hold steady between 0.5% and 0.55% “through the cycle,” indicating stable credit quality.

Meanwhile, net interest income—a primary driver of profitability—is projected to grow at a compound annual rate of 5% to 7% over the next five years, driven by asset repricing and organic expansion.

Repricing Legacy Assets

The bank acknowledged that its low-yielding securities portfolio—a byproduct of pandemic-era investments in U.S. agency mortgages—has constrained performance. Bank of America invested around $500 billion in securities yielding about 2% when the Federal Reserve slashed rates in 2020.

Those assets will finally roll off over the next decade. Between 2026 and 2031, the bank expects $450 billion to $490 billion of those holdings to be reinvested at higher yields. Analysts at Deutsche Bank described this repricing as “a built-in earnings lift” that should fuel better per-share growth starting in 2027.

Rebuilding Investor Confidence

Bank of America’s management team emphasized consistency, long-term profitability, and operational discipline—attributes they argue will drive shareholder value. Yet, many investors remain cautious, comparing its slower growth to faster-moving peers. “In the long run, the stock should follow earnings and returns,” Mayo noted. “Both seem to be heading higher, but it’s a question of patience.”

Tech Stocks Lead the Selloff

The downturn began when Palantir Technologies failed to impress investors despite topping analyst expectations. Shares tumbled after Monday’s record close, sparking a broader retreat in speculative and high-growth assets. A wave of cautious remarks from top Wall Street executives, including Ted Pick of Morgan Stanley and David Solomon of Goldman Sachs, added to the risk-off sentiment.

“After seven consecutive months of gains—the longest stretch in eight years—a pullback may simply reflect natural market rotation or profit-taking,” wrote Mizuho’s Daniel O’Regan. He added that the market’s sudden decline likely signals a “broader de-risking trend” affecting speculative assets, from crypto to AI-linked stocks.

Broader Risk-Off Move

Markets were further weighed down by declines in cryptocurrencies, meme stocks, and other speculative names, suggesting a widespread reduction in risk appetite. The 2-year Treasury yield fell to 3.58%, while the 10-year yield eased to 4.09%, as investors sought safety in government bonds.

Tom Essaye of Sevens Report Research said that until Wednesday, AI stocks had been “masking broader market struggles this earnings season.” He warned that Wall Street’s expectations have become overly optimistic: “The market is priced for perfection—and I mean perfection—and there’s a little bit of a disjointed existence there.”

Market Rotation and Next Steps

Despite the selloff, analysts view the pullback as part of a regular market rotation rather than the start of a deeper correction. “Investors are finally recalibrating expectations after months of exuberance in AI-related sectors,” said one trader. “Valuations had simply gone too far ahead of fundamentals.”

While the S&P 500 and Nasdaq remain near multi-year highs, continued weakness in speculative assets could test market sentiment as investors await upcoming economic data and the Federal Reserve’s commentary.

Core Scientific CoreWeave merger

The decision marks a significant setback for CoreWeave, the fast-growing AI infrastructure company whose proposed acquisition aimed to consolidate control over critical computing capacity across the United States. Institutional Shareholder Services (ISS) had advised investors to reject the transaction, citing valuation concerns and high volatility in CoreWeave’s share price.

Shareholders Say the Deal Undervalues Core Scientific

Several major shareholders, including hedge fund Two Seas Capital, argued that the merger undervalued Core Scientific’s long-term prospects. In a letter to shareholders, Two Seas founder Sina Toussi urged investors to reject what he called a “short-sighted” deal, writing that they faced “an easy choice: reject the transaction and participate in one of the most incredible growth opportunities in the history of the capital markets.”

Under the proposed agreement, Core Scientific shareholders were to receive 0.1235 CoreWeave shares for each of their own, with no downside protection if CoreWeave’s stock price fell. Given that CoreWeave shares have swung wildly since going public, investors said the fixed-ratio structure failed to provide sufficient certainty or value.

CoreWeave Responds, Pledges to Continue Partnership

CoreWeave CEO Michael Intrator acknowledged the decision and said the company would continue working with Core Scientific as a commercial partner. “We respect the views of Core Scientific stockholders and look forward to continuing our partnership,” Intrator said, while adding that CoreWeave will “pursue other deal opportunities” to meet its infrastructure growth goals.

CoreWeave had estimated that the merger would have eliminated $10 billion in future leasing expenses, helping it secure additional data center capacity needed to fulfill contracts with OpenAI and Meta. The collapse of the deal could complicate those expansion plans and limit CoreWeave’s ability to deliver on its ambitious growth targets.

AI Data Center Expansion Faces New Uncertainty

CoreWeave, based in New Jersey, has been attempting to evolve from a GPU hardware provider into a “full-stack” AI cloud platform through aggressive acquisitions. The company’s stock has surged more than 230% since its public debut earlier this year, reflecting investor enthusiasm for AI infrastructure. Core Scientific’s shares, meanwhile, have climbed about 40% year to date.

The termination of the merger highlights growing tension in the AI data center market, where valuations have skyrocketed and competition for computing capacity is fierce. Analysts say the failed deal highlights a widening gap between AI infrastructure providers and investors who are wary of excessive valuations and consolidation risk.