CIO notes that the wider rally in large-cap tech and AI stocks over the past six weeks has been fueled mainly by price-to-earnings (P/E) multiple expansion. (ÃÛ¶¹ÊÓƵ)
NVIDIA has been a top beneficiary of the AI boom, with demand for its chips and platforms boosted by spending on leading edge model training and inference.
Although export curbs to China have impacted the company, sovereign AI deals in Europe and the Middle East, along with strong demand from US large-cap tech firms, have been key growth drivers. The company first reached a USD 1tr valuation just over two years ago. Microsoft, a major AI chip customer, now ranks as the world’s second-largest company with a market cap near USD 3.75tr.
Chief Investment Office view: Without taking any single name views, we note that the wider rally in large-cap tech and AI stocks over the past six weeks has been fueled mainly by price-to-earnings (P/E) multiple expansion. Global tech’s forward P/E now stands close to 27x. We remain structurally bullish on AI, but we would prefer to see a rally underpinned by more sustainable drivers like upward earnings-per-share (EPS) revisions.
For semiconductors, we are closely monitoring tariff-related risks (including two-way risk on chip sector carveouts), while for large-cap tech, we anticipate more near-term margin pressure from heavy AI investment.
Still, these strong AI capex trends and supportive currency dynamics underpin the longer term opportunity, and we forecast 12% global tech profit growth in 2025. Second-quarter results from key contract chipmakers and semiconductor equipment manufacturers over the coming week should offer a cleaner read on broader semiconductor demand. Given current valuations, we recommend investors seek a balanced approach across semis, software, and internet, and suggest investors use any periods of volatility to implement structured strategies, such as capital preservation or put-writing strategies, to build exposure and enhance portfolio resilience.
