US equities may be 'undervalued': CIO

J.P. Morgan Asset Management (JPMAM) chief investment officer of US core equity and head of US derivatives Hamilton Reiner said US equities could still be trading below fair value despite a prolonged tech rally.

Speaking to Financial Standard Reiner said strong corporate earnings, expanding margins and significant dispersion between individual stocks have created opportunities for active managers.

Reiner said concerns about excessive valuations and the sustainability of artificial intelligence-related investments may be overstated, saying the current market is different from the tech bubble of the early 2000s.

"The markets are up 13%-14% year to date, but P/Es are down from 22 to about 18.5, so having lived through the tech bubble... it was a very different environment," he said.

"You had P/Es expanding, people making up valuation measures, and it feels like today the reason P/Es are lower is because of the uncertainty as to how long these earnings and margins are going to continue."

Reiner said the market could be modestly undervalued when considering the outlook for profitability.

"Do I think the current market is fairly priced? I think it's not fairly priced. Maybe even a little bit cheap based upon how we see earnings, earnings growth, margins and where valuations are," Reiner said.

Reiner said while overall markets have remained relatively resilient, he noted some individual companies have experienced significant share price declines.

"Beneath the surface, actually, we have seen a significant number of names sell off at least 20% from their peak. So, the market has corrected, but quietly behind the scenes because some stocks have gone up, some stocks have gone down, and the market's chopped around for the last few months."

Reiner said substantial capital expenditure on AI infrastructure will ultimately translate into earnings growth, particularly as businesses increasingly incorporate the technology.

He argued falling costs associated with AI usage could stimulate further adoption, creating a reinforcing cycle of investment, efficiency and demand.

"I think you have to see ROI on the investments, and the fact is, you are beginning to see some, and what's interesting is you do have this concept of, as you continue to build out, token prices go lower, and then you get more usage, and it's this self-fulfilling flywheel," he said.

"We see it in our jobs. We see it in things that used to take months to build, to analyse data and information, to write pitch books. Now it's days, if not hours."

However, he said the next phase of AI-related investment opportunities will extend beyond the semiconductor manufacturers, hyperscalers and infrastructure providers which have dominated the market so far.

Reiner pointed to healthcare, industrials and cybersecurity as those sectors which could benefit the most, alongside established software businesses.

"I don't think it's all about tech, but I do think that there are other parts of the market that have not participated in the rally the last three to five years that have very good cash flow, very good margins, but because they weren't a chip company or they weren't a memory company, they have not participated," he said.

Financial Standard was a guest at J.P. Morgan Asset Management's 2026 Asia Summit.