HSBC Global Chief Investment Officer Willem Sels argues that U.S. stock valuations are not fully reflecting the AI-driven productivity and earnings boom. The price-to-earnings gap with Europe has narrowed, but equity multiples have yet to price in what he calls the AI structural investment cycle. Chipmakers, in particular, are being discounted by investors, even as 2027 earnings growth forecasts face skepticism. Sels believes this skepticism will reverse as companies provide more concrete evidence through orders and guidance. He is broadly bullish on equities, citing greater-than-expected economic and corporate resilience, as well as proactive responses from governments and firms. Companies adopting AI show stronger earnings, revenue, and profit growth, especially in the U.S., proving the technology is already delivering real productivity gains. The biggest risk for stocks is a sharp rise in bond yields, with Sels flagging a 10-year Treasury yield around 5% as a potential trigger for volatility. He acknowledges that markets have been 'spoiled by low bond volatility for a long time,' but insists that the tailwind of strong earnings makes it hard for stocks not to keep rising.
HSBC Global Chief Investment Officer Willem Sels said U.S. stocks are not as expensive as they appear, as valuations have yet to fully reflect the scale of AI-driven productivity and earnings boom. The price-to-earnings gap between U.S. and European equities has narrowed, but multiples still haven't priced in what Sels calls the AI structural investment cycle. Chipmakers, in particular, are being discounted by investors, even though 2027 earnings growth forecasts are questioned. But Sels believes skepticism will reverse as companies provide more concrete evidence via orders and guidance.
He is broadly bullish on equities, noting that stocks have repeatedly shrugged off headwinds due to greater-than-expected economic and corporate resilience, with governments and firms taking proactive responses rather than passive waiting. Companies adopting AI show stronger earnings, revenue, and profit growth than non-adopters, especially in the U.S., proving the technology is already delivering real productivity gains. The biggest risk for stocks is a sharp rise in bond yields, with Sels flagging a 10-year Treasury yield around 5% as a potential trigger for volatility. He acknowledges that markets have been 'spoiled by low bond volatility for a long time,' but insists that the tailwind of strong earnings makes it hard for stocks not to keep rising.
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