[Update] Investment Monthly: AI revolution – broadening exposure beyond the US and tech

Key takeaways

We think the US equity YTD underperformance is not a reflection of worsening fundamentals but a sign of improved prospects beyond the US and tech. Thanks to AI-led innovation and pro-growth policies, earnings growth is broadening across Communications, Financials, Industrials and Healthcare outside of the Mag-7 stocks.

The rapid AI development in China led by DeepSeek’s breakthrough, and the supportive stance of the government towards private enterprises and tech innovation, warrant our recent upgrade of Chinese equities, and subsequently, Asia ex-Japan equities, to overweight. AI monetisation, cloud expansion and semiconductor growth are key catalysts for the tech sector.

In addition to an improved economic and political outlook for Germany and France, we upgrade Europe ex-UK equities to neutral on increased defence and infrastructural spending in Europe, which also benefits European Industrials. Attractive valuations and underestimates of the number of rate cuts by the Bank of England support our upgrade of UK gilts to overweight. In EMEA, the UAE looks attractive due to its strong financial sector growth, AI-driven infrastructure investments and growing activities outside of oil.

https://www.hsbc.com.my/wealth/insights/asset-class-views/investment-monthly/ai-revolution-broadening-exposure-beyond-the-us-and-tech/

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Publish Date: Tue, 04 Mar 2025, 07:05 AM

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