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

5 March 2025

Willem Sels

Global Chief Investment Officer, HSBC Global Private Banking and Wealth

Lucia Ku

Global Head of Wealth Insights, HSBC International Wealth and Premier Banking 

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.
  • While economic indicators and the election outcome in Germany have spurred hopes for a better economic outlook, Europe is still challenged by economic, geopolitical and tariff uncertainties. However, we see opportunities in the technology, financials and healthcare sectors. 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.

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