US AI Valuations Hit Extremes as Top Fund Managers Pivot to China Tech and Energy
Miles Bennett
The S&P 500's trend-adjusted CAPE has reached 68× — the highest ever recorded. Several top fund managers are already shifting capital from US AI into Chinese tech, UK high-dividend stocks, and global energy, betting the valuation gap will close.
How expensive is the US market, exactly?
Panmure Gordon analyst Joachim Klement's latest research: the S&P 500's CAPE — cyclically adjusted price-to-earnings ratio, smoothing profits over a decade — has hit 68× after adjusting for the earnings trend, surpassing every prior reading on record.
This means → the market is paying up for high prices and above-normal profits at the same time — a "price bubble" and an "earnings bubble" stacked on top of each other.
In plain terms = stocks are expensive, and the profits propping them up are also running hot. If profits revert to normal, valuations get hit twice.
AI semiconductor demand is real — so where is the risk?
Fidelity International portfolio manager Ian Samson acknowledges AI-driven chip demand is real and massive.
But he notes it is ultimately backed by roughly $1 trillion in capex controlled by just a handful of big tech companies.
This means → demand is concentrated in a few buyers. Once that spending slows, downside risk across the supply chain surfaces fast.
Why are these fund managers eyeing Chinese tech?
Ruffer LLP fund manager Alexander Chartres argues the US AI trade has absorbed so much capital that relative value elsewhere has widened — large-cap Chinese tech is a prime example.
He points out that only the US and China can credibly provide cloud computing at scale. Chinese tech firms show solid revenue growth and carry meaningful "option value" — the potential upside from AI businesses still being built.
This reflects a core tension: similar business quality, yet Chinese tech trades at far lower multiples than US peers, weighed down by political risk and weak sentiment on China's economy.
Is real money already moving?
Goldman Sachs' thematic research team advised clients to rotate out of Korean AI trades into the "China AI value chain."
Capital quickly followed into Hong Kong-listed tech: Alibaba's Hong Kong shares jumped over 13% in a single session; the Hang Seng China Enterprises Index rose as much as 4.5% on the day.
This means → "Chinese tech as a valuation gap" is no longer a fringe view — it is getting early validation in actual fund flows.
What options exist for investors who want nothing to do with tech?
Crossing Point Investment Management CIO Tomiko Evans notes the UK market has a very different sector mix from global indices — heavier in financials, energy, healthcare, and consumer staples, all cash-flow-rich sectors.
In plain terms = UK equities are a natural hedge for tech-heavy portfolios: your portfolio has too much tech, the UK has almost none.
Chartres adds: rising inflation volatility has weakened bonds' hedging power. Energy is filling the gap — oil-price spikes tend to drag down both stocks and bonds, but fossil-fuel companies benefit in exactly that scenario.
What is the make-or-break factor for this rotation story?
Chartres notes the beneficiaries go beyond oil majors — oilfield-services companies could gain over the long term as countries ramp up energy infrastructure investment.
"Of course, the oil market could stay weak for a long time," he says. "But that is precisely the point of diversification."
This means → whether this rotation narrative ultimately holds comes down to a single node: can Big Tech's capex keep delivering on expectations? If it does, capital flows back to US AI. If it doesn't, the reallocation truly accelerates.
Content is for reference only, not financial advice.