As the market worries about the sustainability of AI profits, HSBC countered by saying that U.S. stocks "are not expensive" and that the structural investment cycle for AI has yet to be fully priced in.

Willem Sels of HSBC believes that the U.S. stock market is not as expensive as it appears. He points out that current valuations have not fully reflected the scale of the productivity improvements and profit growth driven by artificial intelligence (AI). Sels has observed that the gap in price-to-earnings (P/E) ratios between U.S. and European markets has narrowed, and the so-called "AI structural investment cycle" has yet to be fully priced in. Currently, the expected P/E ratio for the S&P 500 index over the next 12 months is about 19 times, while the European Stoxx 600 index is nearing 15 times. In an interview, Sels, who is the Global Chief Investment Officer at HSBC Private Bank and Wealth Solutions, stated, "U.S. stocks are not expensive. The market is indeed questioning the sustainability of profit growth, but this concern has been reflected in prices, as the P/E gap has already narrowed." He added that chip manufacturers are particularly discounted by investors because the market remains skeptical about profit growth projections for 2027. However, he believes that as companies provide more concrete evidence through order books and performance guidance, such doubts will gradually dissipate. Sels is overall optimistic about the stock market. He believes that although the market has repeatedly been impacted by news volatility, the economy and corporate performance have proven to be "more resilient than people expected," and that both the government and companies have responded proactively rather than passively to these shocks. He pointed out that compared to companies that have not adopted AI technology, especially American firms, those that actively incorporate AI are experiencing stronger growth in profits, revenues, and profit margins, which in itself is a powerful indicator that AI has led to actual productivity improvements. In Sels' view, the single largest risk facing the stock market is the sharp rise in bond yields. He sees the 10-year U.S. Treasury yield approaching 5% as a potential trigger point for volatility. He acknowledges that the market has "long been accustomed to low bond volatility," but simultaneously insists that strong profit momentum makes it difficult for the stock market to halt its upward trajectory. Recently, the bond market has once again dominated the sentiments of stock investors. With the escalation of the U.S.-Iran conflict and renewed concerns about oil prices and inflation, yields have continued to climb. At the same time, hawkish signals from the Federal Reserve and the European Central Bank, fiscal concerns, and increased capital competition amid the AI capital expenditure boom have further elevated yield pressures. Grace Peters of JPMorgan noted last week that a 5% yield on the 10-year U.S. Treasury would have significant psychological implications, potentially triggering a short-term reaction in the stock market. Emmanuel Cau of Barclays also stated that if yields rise to 5%, concerns about the stock market's outlook among investors will intensify noticeably. Regarding the European market, Sels believes that the region's industry diversification and the proactive resilience built by governments and companies have made it less vulnerable to energy crisis worries than previously thought. He views Europe as a good diversification option for investors heavily concentrated in U.S. AI trades, noting that recent capital has shifted from technology sectors to financial sectors, which has been favorable for European stocks.