HSBC's Max Kettner: The AI Trade Hasn't Fundamentally Changed

A sharp selloff in AI and U.S. equities on Thursday undermined Wall Street trading desks’ expectation that the rally would resume after the election. HSBC Chief Multi-Asset Strategist Max Kettner said the decline does not yet signal a fundamental break in the trade; the article gives no specific market-loss figures.

Analysis

The key distinction is between a positioning reset and an earnings reset. If investors entered the event leaning toward a post-election rally, crowded exposure and risk limits can extend a selloff even without deteriorating fundamentals; that flow effect can hit high-duration AI names disproportionately. Conversely, a strategist’s view that fundamentals remain intact is not evidence that the selloff is finished. In the next few days, price action and breadth matter more than the narrative: a rebound led by a narrow group of mega-cap names would be weaker confirmation than improving participation across the market.

Over 1–3 months, test the thesis against earnings revisions, company guidance, real yields, and whether AI-related capital-spending expectations hold up. Over 6–18 months, AI winners still depend on monetization and returns on investment, not election-related sentiment. The contrarian risk is treating a flow-driven decline as a durable change in fundamentals; the opposite risk is using that explanation to dismiss an actual deterioration in estimates. The article provides no drawdown size, breadth, valuation, or positioning data, so it does not support a directional conviction trade.

Key Decisions for Investors

• Do not add broad US-equity or AI beta solely on the claim that fundamentals are intact. Wait for stabilization in market breadth and revisions; use QQQ as a liquid exposure gauge, not as proof of an AI-specific thesis.
• For the next several sessions, monitor breadth, volatility, real yields, and evidence of forced-flow exhaustion. A rebound concentrated in a few mega-cap names, or renewed volatility alongside falling breadth, would argue against treating the move as merely technical.
• Over the next 1–3 months, revisit exposure only if AI-related guidance and spending expectations remain firm while earnings revisions stabilize. Downgrades to those expectations would falsify the “positioning reset” thesis and raise the risk of multiple compression.
• No standalone options or short recommendation from this article: the missing drawdown, valuation, positioning, and earnings data prevent a defensible entry, payoff, or stop level.