I’ve just read an alarming warning about a massive stock market crash, triggered by the artificial intelligence bubble. A lot of people are worried right now. Could they be right?
They might be. For all I know, we could be staring a massive crash in the face. AI hyperscalers like Amazon, Google, Microsoft and Meta Platforms are investing hundreds of billions and can’t be sure they’ll get a decent return on their money.
There’s another concern. The US Federal Reserve may hike interest rates to cool things down, possibly several times. Almost every US rate-hiking cycle has been followed by an economic downturn as costlier borrowing slows business and consumer spending. So yes, the threat is real if not guaranteed.
Are shares heading for meltdown?
The thing is, there’s always somebody, somewhere, warning of a stock market crash. It was all doom and gloom when the US attacked Iran on 28 February. Markets plunged almost 10% in March. But anybody who sold up then will be kicking themselves today.
The S&P 500 just posted enjoyed its best quarter since 2020, up 15% during the three months to June 30. And what led that rally? AI and semiconductor stocks. In other words, the very things we’re supposed to be worrying about today.
So do I think there will be a stock market crash? No idea. Nobody can accurately predict these things. There are simply too many variables, so ignore those who claim they do know. Also, crashes and corrections are part and parcel of investing. It’s the price we pay for the proven superior returns from equities.
So I’m still buying shares. My most recent purchase was FTSE 100 bank HSBC Holdings (LSE: HSBA). The Asia-focused operation was on my buy list for years, and when its shares fell 5% after disappointing results on 5 May, I took the chance to bag it at a discount.
Q1 revenues had climbed another 4% to $19.1bn, but profit was flat at $10.1bn, due to a fraud-related credit impairment and Middle East uncertainty. I decided these were temporary issues. HSBC is a massively profitable operation:
- 2025 – $29.9bn
- 2024 – $2.3bn
- 2023 – $30.3bn
- 2022 – $17.1bn
- 2021 – $18.9bn
The 2025 dip was mostly due to $4.9bn of notable items, such as restructuring, legal provisions, and asset sales.
Are HSBC shares still good value?
HSBC suffered a potentially bigger blow on 4 June when Beijing cracked down on capital outflows from mainland China, threatening its Hong Kong operations. Again, the shares fell. How did I respond? I bought more.
The HSBC share price has had a terrific run. It’s up 268% over five years, and 61% in the last 12 months, with dividends on top. The forward price-to-earnings ratio is still modest at 11.9, while the shares are forecast to yield 4.32% this year. That’s expected to hit 4.83% in 2027.
HSBC has paused its generous share buybacks to fund its final stake in the Hang Seng Bank. I’m looking forward to their resumption.
The shares are likely to slow after a strong run, and if we do get a stock market crash, they won’t escape unscathed. But I still think they’re worth considering today. And if we get a crash or correction, I’ll buy even more at the reduced price.
Should you invest £5,000 in HSBC Holdings right now?
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Harvey Jones owns shares in HSBC Holdings.
