HSBC’s Willem Sels says US stocks are not as expensive as they appear

Wall Street has spent the better part of the last year debating whether US equities are overpriced. Willem Sels, HSBC’s Global Chief Investment Officer, just walked into that debate and essentially said everyone’s reading the receipt wrong. In a Bloomberg Television interview, Sels argued that US stocks look cheaper than their headline valuations suggest because standard price-earnings ratios haven’t yet priced in the structural productivity gains flowing from artificial intelligence adoption. The S&P 500’s forward P/E ratio sits at roughly 19 times earnings. That’s elevated compared to the Stoxx 600 in Europe at nearly 15 times. But Sels contends the gap is narrowing for the wrong reasons: not because Europe is catching up, but because the market is underestimating American earnings power. The AI earnings thesis Sels described what he sees as a “structural investment cycle” driven by AI. The core of his argument is straightforward: companies integrating AI into their operations are generating real productivity improvements that will translate into higher earnings, and most valuation models haven’t caught up yet. Technology and semiconductor stocks are where Sels sees the most ...