Catenaa, Wednesday, October 28, 2026- Global Equities are down about 2.5% from their August peak, driven by a semiconductor and tech sell-off.
In a note to clients, Willem Sels, HSBC’s Global Chief Investment Officer, wrote that equity markets have seen plenty of headlines and volatility, mainly driven by semiconductor stocks and tech-heavy markets.
HSBC said semiconductor stocks have declined despite resilient company results, suggesting that investors are increasingly concerned about the industry’s longer-term earnings outlook rather than its immediate financial performance.
“The main triggers are fears that China’s increased chip production will compress margins, and concerns that excessive leverage at some of the smaller cloud service providers could slow the build-out of data centres,” he wrote.
Sels stressed that 80% of current US data centre construction is pre-leased and the biggest cloud operators are not overleveraged and have therefore not seen major credit spread widening.
Sels said expanding chip manufacturing capacity would take considerable time and investment, potentially slowing how quickly additional supply reaches the market. HSBC expects investor confidence to improve if semiconductor demand remains resilient and major cloud companies maintain their spending plans.
“Now our view remains very positive on AI adoption, which will create a lot of economic value for the AI ecosystem as a whole,” Sels said. “But the increased questions about monetisation reflect the uncertainty about who will capture that value, which means that investors need to differentiate and focus on quality greatly.”
He said that because of the current rotations across the AI stack, they think it is important to participate across the stack.
For example, while semis sold off this month, AI adopters remained quite resilient. Investors will want to separate AI innovation leaders from the laggards, Sels told clients.
Meanwhile, Sels wrote in the November monthly newsletter to clients that HSBC is positioning the market for the next phase of AI monetisation, which extends beyond chips to broader infrastructure and adopters.
“We broaden the expression beyond US IT into AI enablers—financials, materials and energy—linked to funding, inputs and power demand.– We reflect the AI value chain in regional exposure: favour US, Japan and North Asia equity markets (including Hong Kong and South Korea),” he said.
