Willem Sels, the global chief investment officer for HSBC's Private Banking and Premier Wealth division, argues that American stocks are not as expensive as they appear. He contends that current valuations have not yet fully incorporated the productivity and earnings growth driven by artificial intelligence.

Sels points out that the valuation gap between US and European equities has narrowed, and the current multiples still do not reflect what he terms the structural AI investment cycle. The S&P 500 trades at a forward price-to-earnings ratio of roughly 19 times, compared with nearly 15 times for the pan-European STOXX 600 index.

"The US is not expensive," Sels stated in an interview. "The market is questioning the sustainability of earnings growth, but that concern is already priced in, as the valuation gap has compressed." He added that chip manufacturers, in particular, are being discounted by investors, as there is skepticism even regarding 2027 earnings projections. He believes this doubt will reverse as companies provide more concrete evidence through orders and earnings guidance.

Sels remains broadly optimistic on equities. He notes that although markets have been repeatedly hit by news-driven volatility, stocks have recovered quickly each time because economic and corporate performance have been "more resilient than people expected." He also highlights that governments and businesses have responded proactively to shocks rather than remaining passive observers.

He further observes that firms adopting AI are showing stronger gains in earnings, revenue, and profit margins compared with non-adopters, particularly in the United States. This suggests that AI technology is already beginning to deliver tangible productivity improvements.

The single biggest risk facing equity markets, according to Sels, is a sharp spike in bond yields. He suggests that a rise in the 10-year US Treasury yield to around 5% could be a level capable of triggering market turmoil. While acknowledging that markets have "long been accustomed to low bond volatility," he still believes that robust earnings growth provides solid support, making it very difficult for stocks not to keep climbing.