HSBC Identifies Buying Opportunities in Sells-Off of AI and Tech Stocks

While major indexes like the S&P 500 show modest movement, a sharp divergence has emerged beneath the surface. Over a recent three-month stretch, technology and semiconductor exchange-traded funds fell significantly—down 9.1% and 15.4% respectively—while defensive sectors like consumer staples and healthcare climbed. According to HSBC’s U.S. equity strategy team, this shift has left artificial intelligence and tech shares trading at market discounts compared to historically high valuations in defensive equities.

In a research note titled "Don't waste a good sell-off," HSBC highlighted 11 buy-rated equities impacted by the recent unwinding of the AI trade. The list spans major technology firms like Alphabet Inc. and Oracle Corp., alongside critical infrastructure providers powering data centers such as GE Vernova Inc., Vertiv Holdings Co., and Bloom Energy Corp. Nicole Inui, head of equity strategy for the Americas at HSBC, noted that the correction in these specific sub-sectors appears overdone despite solid underlying fundamentals.

Oracle Corp. exhibits one of the most striking valuation gaps on the list. Analyst Stephen Bersey assigned a $316 price target to the stock, which closed at $127.11, representing a potential upside of nearly 149%. The bank pointed to Oracle's substantial contracted revenue, or remaining performance obligations, as evidence that the broader market is undervaluing the enterprise. Similarly, infrastructure suppliers like Vertiv continue to trade well below their prior peaks even as order volumes surge.

What to watch next: Monitor upcoming earnings reports and order volumes from data center infrastructure providers to confirm whether demand fundamentals remain strong despite the market pullback.