HSBC Warns of AI Stock Overweight as Rotation Opportunity Emerges

Market Saturation Signals Potential Shift

HSBC Global Research has highlighted that investor positioning in AI-themed stocks across Asia has reached overweight levels, indicating limited room for further growth. Herald van der Linde, Head of Equity Strategy Asia Pacific at HSBC Global Research, noted that the current market environment in places like Taiwan and Korea has become saturated with AI enthusiasm.

Key Observations from HSBC Research

1. Extreme Positive Sentiment: Analysts and buy-side participants are universally positive about AI stocks
2. Historical Context: Such unanimous enthusiasm is rare, occurring perhaps once every 25-30 years
3. Market Rotation: With current overweight positions, HSBC sees potential for rotation to other markets in 2026
4. Regional Focus: Taiwan and Korean markets are particularly affected by AI euphoria

Implications for Investors

The situation described by HSBC suggests that while AI continues to be a significant theme, the current overweight positioning may limit immediate upside potential. Investors may need to consider alternative opportunities as the market potentially rotates towards other sectors or regions. The warning from HSBC comes as a timely reminder for investors to assess their exposure to AI-centric portfolios and consider diversification strategies.