HSBC's Willem Sels Says US Stock Valuations Have Not Fully Priced in AI Gains

HSBC Global Chief Investment Officer Willem Sels stated that US stocks are not as expensive as they appear, and valuations have yet to fully reflect the scale of AI-driven productivity and earnings boom. Sels pointed out that the price-to-earnings gap between US and European stocks has narrowed, but valuation multiples have not yet fully captured what he calls the structural AI investment cycle. Sels added that chip manufacturers in particular are being discounted by investors, and even their 2027 earnings growth forecasts are being questioned, but he believes that as companies provide more concrete evidence through orders and guidance, this skepticism will reverse. Sels is generally bullish on the stock market, saying that equities have repeatedly shrugged off headwind volatility as the resilience of the economy and corporates has exceeded expectations, with governments and companies taking proactive measures against shocks rather than passively waiting. He noted that companies adopting AI have demonstrated stronger earnings, revenue, and profit growth compared to those that have not, especially in the US, proving that the technology is already delivering real productivity gains. The biggest risk for equities is a sharp rise in bond yields; he considers a 10-year US Treasury yield of around 5% a potential volatility trigger. He acknowledged that the market has "long been spoiled by low bond volatility," but insisted that strong earnings tailwinds make it difficult for stocks not to keep rising.