HSBC: U.S. Stocks Aren't Expensive, Valuations Haven't Fully Priced in AI Potential

Odaily News HSBC's Global Chief Investment Officer Willem Sels stated that U.S. stocks 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 ratio gap between U.S. and European stocks has narrowed, but valuation multiples have not yet fully captured what he calls the structural investment cycle of AI. Sels added that chipmakers in particular are being discounted by investors, even as earnings growth forecasts for 2027 are being questioned, though he believes this skepticism will reverse as companies provide more concrete evidence through orders and guidance.

Sels is broadly bullish on equities, stating that the stock market has repeatedly shaken off headwinds because the resilience of the economy and corporate earnings has exceeded expectations, and governments and businesses have responded proactively to shocks rather than passively waiting. He noted that companies adopting AI are seeing stronger earnings, revenue, and profit growth compared to non-adopters—particularly in the U.S.—proving 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 Treasury yield around 5% seen as a potential trigger point for volatility. He acknowledged that the market has "long been spoiled by low bond volatility," but insisted that the tailwind of strong earnings makes it difficult for stocks to stop rising. (Jin Shi)