HSBC: U.S. Stocks Are Not Expensive, Valuations Have Not Fully Reflected AI Potential

Odaily Planet Daily News: Willem Sels, Global Chief Investment Officer at HSBC, stated that U.S. equities are not as expensive as they appear, and valuations have yet to fully reflect the scale of AI-driven productivity and earnings growth. Sels noted that the P/E gap between U.S. stocks and European equities has narrowed, but valuation multiples have not yet fully priced in what he calls the structural AI investment cycle. Sels added that chipmakers in particular are being discounted by investors, with even 2027 earnings growth forecasts being questioned, but he believes this skepticism will reverse as companies provide more concrete evidence through orders and guidance.

Sels is broadly bullish on equities, noting that markets have repeatedly shrugged off headwinds because the resilience of the economy and corporations has exceeded expectations, with governments and businesses responding proactively to shocks rather than waiting passively. He pointed out that companies adopting AI are seeing stronger earnings, revenue, and profit growth compared to non-adopters, particularly in the U.S., demonstrating that the technology is already delivering real productivity gains. The biggest risk to equities is a sharp rise in bond yields, with the 10-year U.S. Treasury yield around 5% seen as a potential volatility trigger point. He acknowledged that markets have "long been spoiled by low bond volatility," but insisted that strong earnings tailwinds make it difficult for equities not to continue rising. (Jin Shi)