HSBC’s Willem Sels highlights that global equities remain supported by robust earnings growth, led by US Technology and Communications, with AI-driven capex and productivity gains at the core. The bank keeps an overweight stance on Technology and Communications and favours Materials, Financials, Industrials and Utilities as AI beneficiaries, arguing that current valuation levels are not a barrier for further equity upside.

AI capex and productivity drive equities

"Earnings growth, a key driver of equity performance, continues to edge higher in the US, led by Technology and Communications, and powered by two major AI-related forces: strong capex trends and productivity gains."

"Earnings growth should help drive global equity markets up further, and we don’t see current levels as an obstacle. In fact, following the sell-off in early 2026, tech valuations are now reasonably priced compared to other sectors. Analysts expect earnings to grow by 56% in US tech this year, and 25% for the S&P 500. AI’s productivity gains are spreading across sectors. Policy support, including tax incentives in the US and improving regulatory conditions within China’s internet sector, provides a further catalyst. Globally, we see attractive opportunities in semiconductors, data centres and innovative AI adopters across sectors."

"AI continues to transform how businesses operate and compete, making it a long-term investment theme that’s not to be missed. In fact, opportunities should broaden beyond Technology into Industrials, Materials and Utilities, which benefit from the build-out of new data centres and electricity networks, while Financials are supported by strong capital market activity."

"We favour Materials and Financials (across regions) as well as Industrials and Utilities (Global, US and Europe) as key beneficiaries of AI."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)