Standard Chartered's Lam on AI Risks

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Transcript

00:00So, Daniel, there are a couple of things to watch in the markets.

00:03What is top of mind for you?

00:05Because it looks like a bit of a struggle into the end of the year.

00:09Is this just repositioning?

00:11Traders have just clocked off for 2025?

00:15Or is this more worrying signs that we need to pay attention to?

00:21Right now, I believe the market's number one concern is about the AI stocks.

00:28Are they going to get back the returns that they have projected after such big investments?

00:38How are they going to finance for this kind of investment?

00:41Because many of these companies are tapping for the debt market right now instead of using the free cash flow.

00:47So, it's not as clear a picture as, say, this year or a few years before.

00:53So, that's what we see as the number one key risk in the markets right now.

01:00And that's the reason why you're seeing the correction.

01:05So, you're expecting this to continue for the next couple of months?

01:09Or is there something that could turn this dismal sentiment towards AI-related stocks around

01:14in terms of perhaps earnings growth as a driver?

01:17Well, earnings growth has been strong.

01:22It is more about the guidance of the companies.

01:24So, towards the end of the last Q3 earnings season,

01:28basically, there were a couple of companies that have demonstrated some weakness.

01:32At least markets feel that the guidance was not as good as what they're expecting.

01:37And, you know, it's fair to ask because at such variations,

01:42people would be asking a lot for them to perform,

01:46both in terms of results and also in forward guidance.

01:49So, that's fair to ask.

01:50But at the same time, you have to understand that, you know,

01:53over the last few years, we've had a number of full starts for the value stocks.

01:57And this kind of value rotation never lasted for a prolonged period of time.

02:03So, actually, we're, you know, not expecting this time to be any different.

02:08We believe that investors should still be adding to the AI stocks on the dips

02:12because if you look at how much they're dominating the U.S. economic growth,

02:19this year, basically two-thirds of the U.S. economic growth

02:22comes from AI or AI-related investments.

02:24That's a lot.

02:25And the CapEx is projected to be growing at 40% again next year.

02:30So, that's hefty numbers.

02:32And they're still going to carry the flag for the U.S. economic growth.