Willem Sels: «We Don't Think That The US is in a Bubble»
Is AI and the broader US equity market facing a bubble? HSBC does not believe so, adding that the rally could sustain through 2026.
In recent times, AI stocks have skyrocketed with phenomenal returns year after year. Chip-making giant Nvidia, for example, has seen its share price rise around 14-fold since its low in 2022. With the run that has occurred thus far, some investors are beginning to question if the market is in bubble territory.
According to Willem Sels, global CIO at HSBC Private Bank and Premier Wealth, that is not the case.
«We don't think that the US is in a bubble,» Sels said at a recent media briefing. «2026 is again going to be a year where AI continues. I think that there is probably no client that I have met who is negative on the longer-term prospects of AI.»
Earnings Growth, Not Multiples Expansion
Sels notes that AI and the broader US market rally have been driven by earnings growth rather than expansion of multiples. For example, valuations of the «Magnificent 7» stocks (Nvidia, Microsoft, Apple, Alphabet, Amazon, Meta Platforms, and Tesla) compared to MSCI World are currently at a multi-year average.
«We also think that monetization is going to pick up. We are going to be charged more for AI. It's going to be licensed more in industries. We are all adopting it very quickly,» he added.
While HSBC has trimmed exposure to the US, it remains slightly overweight on the market.
Top Risks: Monetary Policy and Economic Data
Nonetheless, there are still risks ahead and the bank has highlighted two major areas of concern.
Firstly, the Federal Reserve may ease less than the market expects – HSBC forecasts only one more cut in December, January or February – which could trigger some turbulence. Secondly, there are also worries in economic data, especially from employment due to tightened immigration policy and lower job creation because of a shift in the roles required.
Four Priorities
Beyond AI, the bank has highlighted four priorities for investors to consider.
First, broaden equity exposure to areas outside tech, including industrials, utilities, financials and M&A-driven opportunities. Second, manage volatility with a multi-asset approach that includes alternatives and gold. Third, seek returns from fixed income with a preference for investment grade and emerging markets. Four, diversify into Asia’s AI ecosystem via a barbell strategy focused on high dividend stocks and quality bonds.
«We remain positive about the US but indeed manage those concentration risks. If there is a risk in the US, we don't particularly see it as being mainly one on economic growth but more one that the Fed will cut less than the market expects because the economy is so resilient,» Sels reiterated. «Nevertheless, we diversify and we diversify mostly by going into Asia.»
