HSBC: US Stock Valuations Do Not Reflect AI Potential

Willem Sels, Global Chief Investment Officer at HSBC, stated that US stock valuations do not fully reflect the productivity and profit potential driven by AI. Although the gap in price-to-earnings ratios between US and European stocks has narrowed, the valuation multiples still do not completely capture the structural investment cycle of AI. Sels pointed out that chip manufacturers are being discounted by investors, and although the profit growth forecasts for 2027 are under scrutiny, he believes that this skepticism will reverse as companies provide more specific orders and guidance. Sels is optimistic about the stock market, noting that it has repeatedly overcome headwinds and volatility, with economic and corporate resilience exceeding expectations, and that governments and businesses have taken proactive measures. He emphasized that companies adopting AI are performing stronger in terms of earnings, revenue, and profit growth, particularly in the US, demonstrating that the technology has led to actual productivity improvements. Sels noted that the biggest risk facing the stock market is a sharp rise in bond yields, suggesting that a 10-year US Treasury yield of around 5% could be a potential trigger point for volatility. He acknowledged that the market has been influenced by low bond volatility for a long time but insisted that strong earnings will continue to drive the stock market higher.

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