HSBC believes investor concerns over aggressive artificial intelligence spending by hyperscale technology companies have become the primary force shaping AI-related equity markets, replacing other themes that have driven sentiment throughout 2026.
The bank has developed a quantitative clustering model to determine which AI narrative is influencing global markets by monitoring the performance of hyperscalers, semiconductor manufacturers, software companies and Chinese internet stocks.
AI Narratives Continue to Shift Investor Positioning
According to HSBC, investors have repeatedly rotated between competing AI themes this year, creating significant swings in equity performance.
The bank said investors “jump between competing AI narratives,” citing the release of Moonshot’s Kimi K3 model and reports of growing lithography competition from mainland China as recent events that have influenced market direction.
Its framework categorizes market behavior into five distinct AI-related scenarios.
Overspending by Hyperscalers Tops the List
HSBC currently assigns the greatest probability, 37%, to the “hyperscaler overspend” scenario.
In this environment, companies supplying data center infrastructure and semiconductor technology outperform, while businesses responsible for the largest capital expenditures underperform “at the expense of the capex spenders.”
The model suggests annualized returns of 12.3% for technology hardware stocks and 11.8% for semiconductor companies, supporting continued strength in markets such as Taiwan and South Korea.
Defensive Rotation and China Competition Also Remain in Focus
The bank gives a 26% probability to “AI positioning capitulation,” where investors move away from crowded AI trades into defensive industries including pharmaceutical and biotechnology companies, resulting in a 14.3% decline for semiconductor stocks.
HSBC also assigns a 20% probability to “China competition concerns,” arguing that the launch of Kimi K3 has renewed investor attention on Chinese competition and encouraged capital flows into mainland China’s media and consumer services sectors.
The remaining scenarios include “AI disruption fears” at 9% and “AI euphoria” at 8%. In the latter case, AI supply chain companies lead market gains, while semiconductor stocks post annualized returns of 19.1%.
HSBC said the model provides investors with a framework for evaluating how changing AI narratives influence sector leadership and the relative performance of emerging-market equities.
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