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 compelling upside. He pointed to investor skepticism around chipmakers’ 2027 earnings forecasts as potentially misguided, suggesting that as AI-adopting firms start reporting tangible results, the doubters will have to recalibrate.

HSBC’s broader investment strategy currently favors both US and Asian equities, which tells you the bank is putting institutional weight behind the view that these markets offer better risk-adjusted returns than their European counterparts.

The 5% problem

Sels isn’t blind to risks, though. He flagged the 10-year Treasury yield hovering near 5% as a critical variable that could inject serious volatility into equity markets.

The tension between these two forces, rising corporate earnings from AI and rising yields from persistent inflation concerns, creates what amounts to a tug-of-war for equity prices. Sels is betting that the earnings side wins, but he acknowledged that Treasury yields at these levels represent a genuine volatility trigger that investors need to manage carefully.

Reading between the multiples

The narrowing P/E gap between the S&P 500 and the Stoxx 600 deserves closer examination. At 19 times versus 15 times, the premium for US stocks has compressed from its recent highs. Sels reads the compression as a byproduct of skepticism about whether AI-driven earnings can be sustained, not as a rational repricing of fundamentals.

Sels has been HSBC’s Global CIO since 2021, having joined the bank in 2009. During the peak of the post-pandemic tech rally, the S&P 500’s forward P/E exceeded 22 times. By that benchmark, current levels look almost restrained.

HSBC’s recommended approach of diversifying across geographies and sectors reflects this dual reality. The bank isn’t telling clients to go all-in on US tech. It’s saying the value is there if you know where to look, and that the biggest risk isn’t overvaluation. It’s a bond market that decides to compete for capital at exactly the wrong moment.

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