DBS: The fundamentals of large technology companies remain robust, and there is no AI bubble

The Chief Investment Officer of DBS Bank, Hou Weifu, stated that there is no bubble in the AI sector. Currently, the AI industry has the support of profit growth, and the fundamentals of large technology companies remain robust, which is fundamentally different from the internet bubble of 2000. Although substantial ongoing capital expenditures in AI will cause short-term shocks to tech company profit margins, leading to stock price adjustments, the long-term trajectory of double-digit profit growth remains unchanged.

In terms of asset allocation, the bank indicated that the layout for 2026 needs to seize the wave of artificial intelligence, respond to inflation with physical assets, and seek value opportunities in Asian markets (excluding Japan).

Regarding stocks, the bank recommends focusing on markets with significant valuation discounts and sectors supported by long-term growth momentum. In the context of a weakening dollar and attractive valuations, Asian markets (excluding Japan) remain a key choice. The US Dollar Index (DXY) is expected to reach around 94.8 in the fourth quarter of 2026, which historically indicates stronger performance in Asian stock markets, including increased capital inflows, lower costs of dollar-denominated debt, and rising commodity prices.

In terms of bonds, due to the continued narrowing of spreads and the still low risk of recession, the bank prefers to allocate to investment-grade bonds rather than high-yield bonds, as the risk-reward ratio remains unfavorable.

Additionally, the bank expects continued support for gold prices from central bank demand and strong ETF inflows, with gold prices projected to rise to $5,100 per ounce in the second half of the year