Why Buy US Stocks as Dow Hits New High: AI Earnings Take Over from Valuation Expansion, Global Allocation Value Persists

At the close on August 5, the three major US stock indexes diverged again: the Dow Jones Industrial Average rose 263 points to 54,349, a fresh record high; the S&P 500 slipped 0.17% to 7,723; the Nasdaq Composite fell 0.83% to 26,363 after sharp drops in SpaceX and AMD following their earnings. A single day’s move may be noise, but for investors weighing whether to enter, the real question is: after repeated index highs, does the long-term logic of “why buy US stocks” still hold? Based on the latest earnings season data and institutional analysis, the answer is becoming clearer—earnings growth is taking over from valuation expansion as the new core engine of the US market.

Earnings Season Provides Strongest Confirmation: Earnings Growth Fully Takes Over

The market’s mood repair starts with fundamentals. According to the latest Goldman Sachs chief strategist team report, as of July 31, more than two-thirds of S&P 500 companies (by market cap) had reported Q2 results, with 64% beating earnings expectations by at least one standard deviation; excluding one-time investment gains from a few tech giants, S&P 500 earnings grew 26% year over year, and median company earnings growth hit 12%, well above the 9% expected. More notable is the structure: AI infrastructure-related companies contributed about one-third of S&P 500 Q2 earnings growth, and Goldman expects this share to rise above 50% from H2 2026 through 2027.

Some worry that the Big Five tech giants’ $182 billion in Q2 capex will drag cash flow, but Goldman argues this reflects market confidence that AI will drive higher revenue growth—the giants raised $101 billion via debt and equity to fill the cash flow gap, essentially trading “today’s investment” for “tomorrow’s growth.” As long as the earnings growth fundamental has not materially deteriorated, even sharp rotations and short-term swings in AI trades leave the US bull market’s support intact. That is why the post-earnings drops in SpaceX and AMD are seen more as profit-taking after rapid gains than as a reversal of the AI narrative.

Valuation Pressure Gradually Absorbed: PEG at Post-Crisis Lows

For long-term investors, valuation is always a concern. CICC Wealth’s latest CIO report notes that S&P 500 earnings per share are expected to grow about 25% in 2026; if delivered, the P/E would fall to 20-21x, narrowing the gap with A-shares’ 17x. More critically, by the P/E-to-growth (PEG) ratio, the S&P 500’s PEG is at its lowest since the subprime crisis—meaning that if earnings persist, current valuations are actually an allocation opportunity rather than a reason to exit.

In the past two years, US stocks at times lagged A-shares and emerging markets, and RMB appreciation also eroded some overseas returns, but rapid earnings growth is reversing that. For Asian investors agonizing over “US stocks are too expensive,” the race between valuation digestion and earnings upgrades is the core clue to understanding the US allocation window. When static valuations look scary but dynamic valuations decline year by year as earnings deliver, that is one of the most typical features of a long bull market.

Full-Chain Layout: Why US Stocks Better Capture AI Opportunities Than Japan and Korea

Recent US earnings growth has been largely driven by the AI industry, and the key to its sustainability lies in whether AI investment can generate reasonable financial returns. CICC Wealth believes three positive changes this year are clarifying the answer: the rise of AI agents is significantly accelerating token consumption, expanding demand scenarios from “humans using AI” to “machines calling AI,” with no peak in sight; compute chip lifecycles are extending from 2-3 years to 5-6 years, rental prices are rising to improve ROI, and pension and insurance funds are actively participating in AI investment; the “two-power structure” between China and the US is becoming clearer, with China’s cost-effective models and the US compute ecosystem jointly enlarging the market, broadening the beneficiaries of the AI trend.

By contrast, Japanese and Korean markets have performed well by focusing on upstream supply chains, but manufacturing profit margins tend to mean-revert, and ultra-high upstream profits will eventually attract new supply. US stocks feature a full-chain layout—global leaders across upstream, midstream and downstream are all represented, so from a portfolio perspective they do not depend heavily on a single segment’s cycle like Japan and Korea. For those seeking a more balanced way to capture the AI industrial revolution and ensure long-term winners appear in their portfolios, US stocks are clearly more robust than Japanese or Korean markets. This also explains why, with AI capex expected to rise from under $400 billion in 2025 to over $1 trillion by 2028, US assets remain the preferred vehicle for global capital.

Structural Advantage: Moderate Volatility, Long and Slow Bull Market Suits Long-Term Capital

Another answer to “why buy US stocks” lies in risk characteristics. CICC Wealth research shows A-shares exhibit “high volatility, short bull and long bear,” while US stocks show “moderate volatility, long bull and short bear”—a difference driven by the ratio of “long money” to “short money.” In A-shares, patient long-term investors are easily worn down by huge swings and prolonged declines; US volatility characteristics better encourage steady long-term investing. As the world’s two largest economies, China and the US maintain independent economic and policy cycles, and the correlation between their stock markets has long been only 0.2-0.3.

This means that by allocating a portion to US stocks, Asian investors can noticeably improve portfolio risk profiles, rebalancing more calmly during market declines rather than chasing highs and panic-selling. In an environment of geopolitical fragmentation and high uncertainty, US stocks represent large-country assets—with strategic depth and economic resilience—whose safe-haven value is rising. HSBC also reiterated in its latest report that US growth is resilient and earnings breadth is expanding, maintaining a “moderate overweight” stance on US equities.

Institutions Still Adding: Rotation, Not Rout; AI Narrative Far from Over

Institutional positioning is more persuasive. Regarding recent semiconductor and memory stock adjustments, HSBC characterizes them as “rotation” rather than “rout”: over the past month, Samsung, SK Hynix, Intel and Micron each fell about a third, but software stocks rebounded strongly—the Morningstar Global Software & Applications Index rose about 16% from its June low, and Salesforce, Workday and ServiceNow posted notable weekly gains. Capital is not fleeing AI; it is reallocating within AI, moving from crowded chips to valuation troughs. HSBC also forecasts Asian data center capacity will more than double by 2030, reaching about 40% of the global total, supporting long-term demand across chips, equipment, cooling and power.

Goldman also reassured markets in its latest report, arguing the current pullback is a typical crowding squeeze and consolidation; with hedge funds and ETF investors sharply cutting leverage, the deleveraging risk has been largely released, and exceptionally strong corporate earnings remain the bull market’s core engine. The two firms agree: short-term volatility does not change the long-term trend, and the AI narrative is far from over—it is just moving from “all boats rising” to “selective stock picking.”

How Asian Investors Should Respond: Build Strategic Positions Amid Volatility

Turning to execution, given the coexistence of Dow highs and Nasdaq swings, Asian investors may consider the following:

• Avoid chasing single-day hotspots; treat US stocks as part of a long-term strategic allocation, building positions gradually during pullbacks rather than betting all at once;
• Watch rotation opportunities within AI—as semiconductors cool, software, cloud, healthcare and consumer leaders may absorb inflows; Eli Lilly raised its full-year guidance, and Amgen and Disney beat estimates, showing earnings diffusion;
• Monitor macro data and Fed signals: CME FedWatch shows the September rate hike expectation has fallen to 54.9%, with employment and services data remaining key variables; monetary policy path will directly affect valuation levels;
• Control concentration in any single track, beware event-driven shocks such as SpaceX’s lockup expiry (from August 6) on sentiment, and participate in US stocks with a portfolio mindset rather than a betting mindset.

Overall, the value of US stocks lies not in chasing daily highs but in the earnings quality, full-chain layout and safe-haven attributes of large-country assets they represent. As earnings growth continues to take over from valuation expansion, the answer to “why buy US stocks” may be found in the fundamental data after each bout of volatility. Of course, markets carry risks; uncertainty around Fed policy, geopolitics and AI capex returns remains variables investors must constantly watch. For Asian investors seeking lower-barrier exposure to the Nasdaq, gradually building strategic positions amid volatility may be more practical than waiting for a “perfect entry point.”