Lyon: The AI market is expected to reach a tipping point next year, and India and Indonesia are expected to benefit from market rotation

The Zhitong Finance App learned that Lyon released a research report saying that the artificial intelligence (AI) gold rush was driven by abundant liquidity and dominated the investment pattern this year. Looking ahead to next year, the bank sees plenty of evidence that AI transactions are about to run out of momentum, even though the bank's core assumption is that momentum and profit will continue until the first half of next year before reaching a critical point. As a result, the bank set a target of 7,200 points for the S&P 500 index for the middle of next year. The bank is currently giving South Korea an “additional” rating as the bank's most preferred investment target for AI momentum; at the same time, it is considering treating India and (to a relatively low level) Indonesia as the main rotating destinations when the technology stock market declines in the first half of next year.

According to the bank, valuations, profit expectations, index concentration, capital expenditure, and retail participation all indicate that a bubble is forming. Coupled with the increasingly unstable macroeconomic fundamentals of the US, the risk is further amplifying. AI investment in the US “Big Five Hyperscaler Cloud Service Providers” (Hyperscaler 5) has surged parabolic to US$357 billion in the past year, up 73% year over year, but may be derailed due to a combination of risks such as technological disruption, commercialization, asset depreciation, and a revolving financing structure.

Lyon also pointed out that the total return of emerging markets in US dollars since this year has reached 32%, the best performance since 2017. The bank judged the sustainability of this wave of markets based on 6 indicators and found that risk appetite, dollar trend, profit growth per share, and currency cycle all sent positive signals, and there was still uncertainty about the timing and relative value creation. The bank expects the emerging market to continue until next year, and targets the MSCI Emerging Markets Index at 1,550 points for the middle of next year, with room for a 12% increase from the current level.