Middle East conflicts give way to profit-making opportunities! HSBC shouts "increase holdings" in US stocks, AI bull market narrative returns to Wall Street center.

Signs of easing political risks surrounding GEO Group Inc in the Middle East are shifting the core narrative of global stock markets back towards AI-driven fundamental performance growth factors, prompting international financial giant HSBC Holdings Plc to upgrade its rating on the US stock market. Wall Street giants such as Citigroup, JPMorgan, and BlackRock, Inc. believe that the political war trade theme of GEO Group Inc is giving way to profit momentum, AI computing capital expenditure, and the return of technology company profits to the market's core logic. HSBC's senior strategist Alastair Pinder has upgraded his rating on the US stock market from "neutral" to a more optimistic "buy"/"hold" equivalent rating, pointing out that the AI-driven profit expansion momentum has clearly turned positive. Pinder noted that overall earnings for the S&P 500 index are expected to grow by 14% in the three months ending in March, marking the fastest expansion rate since 2024. In a research report released to clients on Tuesday, Pinder wrote, "As US economic activity and profit momentum appear stronger, we are upgrading our market rating from neutral to buy/hold." To provide additional financial support for this latest configuration rating adjustment, the strategist also adjusted the rating of European stock markets, excluding the UK, to "neutral," citing weaker economic growth activity and greater fundamental downside risks due to higher energy prices. As of the close of the US stock market last Friday, the S&P 500 index has achieved four consecutive weeks of weekly-level gains, the longest such streak since October 2024, mainly due to traders increasingly ignoring the war noise between the US-Israel and Iran the core logic behind this being the over two-week-long ceasefire agreement between Washington and Tehran helping boost Wall Street's bullish confidence. Why is the stock market ignoring the war? The answer lies in the increasingly strong profitability demonstrated by companies during earnings season. As the US earnings season kicked off in mid-April, strong profit expansion expectations around artificial intelligence computing infrastructure provided support, and the market increasingly believed that a long-term stable ceasefire agreement would be reached soon among the US, Iran, and Lebanon due to domestic pressure, leading top Wall Street investment institutions such as BlackRock, Inc., Goldman Sachs Group, Inc., and Morgan Stanley to become more optimistic about the future of the stock market, highlighting their confidence in a significant recovery in market valuations after the temporary ceasefire between the US and Iran, strong corporate profit resilience, and the trend of positive earnings in technology companies driven by AI computing power, as evidence that market risk appetite is significantly warming up. While the political storm surrounding GEO Group Inc in the Middle East is not yet over, Wall Street's bullish sentiment towards global stock markets is growing stronger. After experiencing initial severe selling turbulence, Wall Street institutions and investment forces seem to be ignoring these war-related noises and no longer seeing war as the "decisive variable determining market direction" as they did at the beginning of March, instead largely "ignoring the noise of war." Several Wall Street financial giants attribute the resilience of the current stock market to the continuous upward revision of earnings expectations of companies, especially technology companies closely related to AI computing infrastructure, whose strong profit expectations remain uninterrupted by the war. With the benchmark of the Korean stock market, the KOSPI Composite Index, hitting historic highs under heavy pressure from the deteriorating geopolitical situation surrounding GEO Group Inc, and the Taiwanese stock market hitting historic highs driven by one of the biggest winners in the AI boom, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, along with the Philadelphia Semiconductor Index experiencing a record 18 consecutive trading days of gains, and the S&P 500 index rising for four consecutive weeks, investors are increasingly convinced that the "AI computing investment theme" can overpower all market noise, especially the political noise related to GEO Group Inc. As shown above, with the easing of Iranian risks, the US stock market has rebounded as of the close of the US stock market last Friday, the S&P 500 index has risen for four consecutive weeks. Alastair Pinder, a senior strategist at HSBC, highlighted several key investment logics that are supportive. Pinder wrote, "With close to 30% of US companies having already reported earnings, the initial earnings growth readings are encouraging, with 84% of companies beating Wall Street's consensus expectations (higher than the five-year average of 78%), with an average beat of approximately 12%." "At the same time, valuations do not appear overly demanding." Furthermore, stock buybacks have been providing a "stable but important tailwind factor." On the other hand, Pinder noted that several areas deserve close attention, with oil prices being one of them. He stated that tax rebates are currently cushioning the impact of high Brent crude prices. But if oil prices remain near historic highs after June typically when 90% of tax rebates have been distributed "consumer pressure in the US market may intensify." If energy prices remain high, sector rotation should also be a focus. While a prolonged ceasefire agreement could significantly alleviate oil prices, especially as traffic in the Hormuz Strait rapidly returns to normal, a series of follow-on effects from high Brent crude prices could still be factored into the political premium surrounding GEO Group Inc. Profit concentration is another area that Pinder recommends traders closely monitor, pointing out that AI chip superpower NVIDIA Corporation (NVDA.US) and storage giant Micron (MU.US) are expected to contribute a "significant portion" of overall profit growth for the S&P 500 index. Higher profit and market cap concentration will increase risk, but Pinder noted that this skew might still lean towards an upward trajectory in a bullish market sentiment. Wall Street has already ignored all noise! The new bull market driven by the narrative of the "AI bull market" is unfolding The mainstream asset allocation direction on Wall Street is shifting from "GEO Group Inc political hedge trades" back to "bull market trading themes driven by AI computing power." As models, inference chains, and multimodal/agentive AI workloads drive exponential expansion of computing resources, the capital expenditure focus of tech giants is increasingly towards the concentration of AI computing infrastructure under the explosive demand for AI computing power, and global investors are anchoring the "semiconductor stock bull market narrative" around NVIDIA Corporation, Alphabet Inc. Class C TPU cluster, and AMD's new product iterations and AI computing cluster delivery expectations as one of the most certain economic investment narratives in global stock markets; this also implies that investment themes closely related to AI training/inference such as electricity, liquid cooling systems, and optical interconnect supply chains will continue to follow the leaders in AI computing power, NVIDIA Corporation, AMD, Broadcom Inc., Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, Micron, even as the Middle East political situation faces uncertainty, they still remain at the forefront of the hottest investment camps in the stock market. Predictive data released recently by Bank of America Corp's strategists show that with the accelerated growth in the core AI computing industry chain (led by leaders like NVIDIA Corporation, Broadcom Inc., Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, and Marvell Technology, Inc.) and other areas such as storage/logic chips, advanced 2.5D/3D packaging, and data center power chains, the global semiconductor market is expected to reach a total size of $20 trillion by 2030, with an annual compound growth rate of 20% from 2025 to 2030. By comparison, the global semiconductor market was expected to be less than $1 trillion at least by 2025. With the explosive launch of AI agents such as Claude Cowork from Anthropic and self-executing super AI agent tools like OpenClaw in 2026, according to financial giants like Morgan Stanley, the AI computing investment theme is transitioning from the "AI GPU/ASIC computing power race" to "AI intelligent agent-driven full-stack AI systems," and in this transition of the AI narrative, data center CPUs and storage chips may emerge as the biggest winners. HSBC has upgraded its rating on US stocks from neutral to buy, citing clear positive US profit momentum, with first-quarter profits expected to grow by approximately 14% year-on-year, with 84% of disclosed companies surpassing expectations and an average of 12% above expectations; Citigroup has also upgraded its rating on US stocks from "neutral" to "buy," emphasizing the increasing contribution of US AI technology prosperity to global profit growth, with approximately half of the global EPS growth expected to come from the technology sector by 2026; The world's largest asset management giant, BlackRock, Inc., has also raised its rating on US stocks to "buy," with the core reason being that the disruption of global growth caused by the Middle East conflict is manageable, strong profit expectations in technology, and a clear preference for AI computing infrastructure, power equipment, and data center-related AI beneficiary chains. In terms of price targets, JPMorgan has raised its year-end target for the S&P 500 from 7200 points to 7600 points and has increased its EPS forecast for 2026 from $315 to $330 and for 2027 from $355 to $385, in part due to the momentum of profit growth driven by AI and the technology sector. This indicates that mainstream Wall Street funds still tend to believe that the AI market hasn't bottomed out yet; if the situation with GEO Group Inc improves rapidly, JPMorgan believes the index could even reach close to 8000 points by the end of the year. Morgan Stanley's star strategist Mike Wilson has maintained a bullish analytical framework, believing that the recent rebound in US stocks is supported by fundamentals, with an earlier target of 7800 points for the S&P 500 in 2026 and the recent pullback being seen more as a correction rather than the beginning of a bear market, while favoring cyclical stocks, quality growth stocks, and AI hyperscalers. As of the close of the US stock market last Friday, the S&P 500 index closed at 7165 points.