Lyon: AI market is expected to reach a tipping point next year, with India and Indonesia expected to benefit from market rotation.

Lyon released a research report claiming that the gold rush in artificial intelligence (AI) is being driven by ample liquidity and is dominating this year's investment landscape. Looking ahead to next year, the bank sees a lot of evidence indicating that AI trading is about to run out of steam, although the bank's core assumption is that momentum and profitability will continue until the first half of next year, reaching a tipping point thereafter. Therefore, the bank has set its target for the S&P 500 index in the middle of next year at 7,200 points. The bank currently has a "buy" rating for Korea as its preferred investment target for AI momentum; at the same time, it considers India and (to a relatively lesser extent) Indonesia as the primary destinations for rotation once the tech stock market fades in the first half of next year. The bank points out that valuations, profit expectations, index concentration, capital spending, and retail participation all indicate that a bubble is forming, coupled with increasingly unstable macroeconomic fundamentals in the United States, which further increases the risk. The investment in AI by the top five hyperscalers in the United States has skyrocketed to $357 billion over the past year, a 73% increase year-on-year, but it may veer off course due to a combination of risks such as technological disruptions, commoditization, asset depreciation, and the structure of cyclic financing. Lyon also points out that emerging markets have delivered a total return of 32% in USD terms so far this year, marking the best performance since 2017. The bank uses six indicators to assess the sustainability of this market trend, and found that risk appetite, the trend of the USD, earnings growth per share, and the currency cycle all send positive signals, although there is still uncertainty regarding timing and relative value creation. The bank expects the emerging markets trend to continue into next year, and has set its target for the MSCI Emerging Markets Index at 1,550 points by the middle of next year, representing a 12% upside from current levels.