{"id":7902,"date":"2026-06-18T09:12:46","date_gmt":"2026-06-18T09:12:46","guid":{"rendered":"https:\/\/www.fintechpulse8.com\/?p=7902"},"modified":"2026-06-18T09:12:46","modified_gmt":"2026-06-18T09:12:46","slug":"how-ai-and-semiconductors-are-reshaping-the-market","status":"publish","type":"post","link":"https:\/\/www.fintechpulse8.com\/?p=7902","title":{"rendered":"How AI and semiconductors are reshaping the market"},"content":{"rendered":"<p><\/p>\n<div>\n<p><iframe loading=\"lazy\" src=\"https:\/\/iframe.iono.fm\/e\/1687052?layout=modern\" width=\"100%\" height=\"170\" frameborder=\"0\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>You can also listen to this podcast on iono.fm here.<\/p>\n<p><strong>SIMON BROWN: <\/strong>I\u2019m chatting with Sean Ashton, head of investments at Private Clients by Old Mutual. Sean, appreciate the early morning time.<\/p>\n<p>A great piece you wrote recently. You talk around all the screaming headlines that we see out there pretty much across the board. They are scary headlines. Broadly though, markets are moving higher.<\/p>\n<p>You make the case that they really are being driven by strong earnings, regardless of what the headlines are saying. You say you\u2019ve seen some of the best earnings potentially in your investment career.<\/p>\n<p><strong>SEAN ASHTON: <\/strong>Good morning, Simon, and good morning to your listeners. Yes, it\u2019s a lot that you\u2019ve unpacked there and you\u2019ve summarised it very well, quite quickly. But I think the long and the short of it is that we\u2019re in an investment boom \u2013 certainly in the US \u2013 that I haven\u2019t witnessed in my career. It\u2019s obviously centred on AI. Many listeners will be aware of that.<\/p>\n<p>But what\u2019s quite notable is that when we look at the aggregate earnings growth of the S&amp;P\u00a0500, expectations for this year are about 26% year-on-year growth.<\/p>\n<p>And, if you look back over the last 25 years or so, pretty much from the turn of the millennium to now, what\u2019s notable about that is that it\u2019s occurring in the context of not being recovery or for a recessionary period.<\/p>\n<p>Read:<br \/>A tale of two markets: The US and South Africa<br \/>S&amp;P 500 extends winning streak despite Iran war<br \/>S&amp;P 500 hits record high<\/p>\n<blockquote>\n<p>So when we look at historical periods of very strong earnings growth comparable to that number or better, it has always come off the back of a recessionary recovery.<\/p>\n<\/blockquote>\n<p>In this case we\u2019ve had two years of pretty decent growth \u2013 even prior to this. So it stands out in the sense that it is the strongest in the last 25 years that has not occurred coming off a recession. And that\u2019s notable.<\/p>\n<p>So this is genuine investment-led very strong earnings growth that we think could continue for a while.<\/p>\n<p><strong>SIMON BROWN: <\/strong>Yes, it is, and \u00a0that\u2019s a big number. I mean 26% is a big, big number, make no mistake about that. But it does what it means. And what I\u2019ve seen in some of the stocks I\u2019ve been having a look at is that stocks have been running, but with that sort of earnings behind them. And to be clear, that\u2019s the average. So we have a bunch doing better than that.<\/p>\n<p>On valuations \u2013 and there are many ways to value, I appreciate that \u2013 broadly we can say valuations aren\u2019t as scary as some of the elevated prices would lead us to suggest.<\/p>\n<p><strong>SEAN ASHTON: <\/strong>This is what\u2019s notable, Simon. Look, it has been a very narrow, narrow market in terms of leadership. It has \u00a0basically been semiconductors and not much else. So your picks and shovels of the AI boom have been the ones to be the first-order beneficiaries. That\u2019s obvious.<\/p>\n<p>We\u2019re actually looking for the next leaders. It\u2019s not clear what those are yet; we\u2019re doing a lot of work on that. But certainly if you look at the semiconductor space you\u2019ve had many stocks that have gone up hundreds of percents.<\/p>\n<p>Read: Semiconductor giants are powering the AI revolution<\/p>\n<p>Curiously their PE multiples in cases have actually come off over the last 12 months or so \u2013 and that tells you the extent of earnings upgrades that we\u2019ve seen in this space.<\/p>\n<p>Even if you look at the S&amp;P\u00a0500 in aggregate, PE multiples are well off their highs. I think we\u2019re trading somewhere around 20 or 21 times next 12-month earnings.<\/p>\n<p>I hear this term \u2018AI bubble\u2019 bandied around a lot. It\u2019s certainly not showing up in the valuation multiples. The questions that we would ask ourselves longer term is how long the earnings cycle lasts \u2013 or are the margins sustainable? Is the capex cycle sustainable? Those are the better questions to be asking.<\/p>\n<p>Read:<br \/>SpaceX IPO raises $75bn in biggest debut ever<br \/>AI bubble debate gets real as chip stocks rally turns historic<\/p>\n<p><strong>SIMON BROWN: <\/strong>That\u2019s a great point because there are always risks. The assumption that just because markets have gone up makes them too expensive is not necessarily the point.<\/p>\n<p>But there is an argument to be said, kind of get those, I don\u2019t know, \u2018tripwires\u2019 for a phrase, that we can keep an eye on if margins start to shrink, if capex suddenly collapses \u2013 \u00a0whatever it might be. That could be that warning signal.<\/p>\n<p><strong>SEAN ASHTON: <\/strong>Absolutely. And I think the big kind of hairy question we\u2019re asking ourselves at the moment \u2013 and you\u2019ve seen it in the valuations of the so-called hyperscalers, companies like Microsoft, Meta, Amazon, Alphabet, et cetera, \u00a0and Oracle is probably a more recent one you can throw in the mix \u2013 [is about] these companies that have transitioned from very capital-light platform businesses into extremely capital-intensive infrastructure businesses.<\/p>\n<p>Now it looks to us like the returns on capital are good. But the point is that there\u2019s a lot of capital being deployed.<\/p>\n<blockquote>\n<p>We think that group of companies will spend something of the order of what will certainly be call it $750\u00a0billion on capital investment this year, and I\u2019m sure more north of a trillion next year.<\/p>\n<\/blockquote>\n<p>These are crazy numbers. We\u2019re talking dollars here.<\/p>\n<p>The question to us is do the returns on capital remain competitive in the after years as the base continues to get bigger and bigger?<\/p>\n<p>And ultimately what does that mean for the ratings of these companies because they\u2019re very different beasts from what they were a few years ago when they were buying back stock and just managing their capital bases down? Now they\u2019re doing the opposite.<\/p>\n<p>Read:<br \/>Tech bubble fear lures investors to hedge with exotic options<br \/>80 Seconds of big tech earnings will decide stock market\u2019s fate<br \/>The rise of the Magnificent 70<\/p>\n<p><strong>SIMON BROWN: <\/strong>A great point. It has fundamentally changed.<\/p>\n<p>A last question. To go back to your point, you talked around the next leaders. I sometimes lie awake at night stressing that I\u2019m not finding them. The flip side is you said you\u2019re still looking for them. We don\u2019t need them. We don\u2019t need to know what they are today.<\/p>\n<p>We can find them in time. We can change our minds about it. What I\u2019m trying to say is there\u2019s some flexibility in who it\u2019s going to be and how we are going to respond.<\/p>\n<p><strong>SEAN ASHTON: <\/strong>Absolutely. I\u2019m so glad you mentioned that, because it\u2019s all about flexibility \u2013 and often the market tells you where to look. And certainly it\u2019s not obvious outside of semis [semiconductor stocks] right now, but I think what will start to show up is relative strength.<\/p>\n<p>Stocks start to outperform consistently in a new sector or subsector, so the leaders will show their hand. I think that\u2019s the key and we\u2019ve got to be on the lookout for them.<\/p>\n<p>Read:<br \/>Magnificent 7 is passe: This group of AI stocks can replace it<br \/>Big tech is suddenly impacting niche market for US dividends<\/p>\n<p><strong>SIMON BROWN: <\/strong>I like that. The leaders will show their hand. They will. We just need to make sure that we are looking, because we will see it when it comes.<\/p>\n<p>We\u2019ll leave it there. Sean Ashton, head of investments, Private Clients for Old Mutual, appreciate the early morning time.<\/p>\n<\/p><\/div>\n<p>#semiconductors #reshaping #market<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You can also listen to this podcast on iono.fm here. SIMON BROWN: I\u2019m chatting with Sean Ashton, head of investments at Private Clients by Old Mutual. Sean, appreciate the early&hellip; <\/p>\n","protected":false},"author":1,"featured_media":7903,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[33,373,768],"class_list":["post-7902","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-market","tag-reshaping","tag-semiconductors"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/7902","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7902"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/7902\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/7903"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7902"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7902"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7902"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}