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This podcast was recorded on May 12 2026 and all information was correct at the time of recording.
Nothing in this podcast is personal advice – you should seek advice if you’re unsure what’s right for you. Investments rise and fall in value, so you could get back less than you invest. And past performance is not a guide to the future.
Full podcast episode transcript
Anna
Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. I'm Anna Macdonald, Investment Strategy Director…
Matt
.. and I'm Matt Bridgeman, Senior Equity Analyst. And once again, this is your investment special. And as always, we've got a lot to talk about. And first, big welcome to Anna, who's going to be joining me as co-host for the foreseeable future whilst Emma is off on maternity leave.
Anna
Thanks, Matt. Yep Emma leaves some big shoes to fill, but I can't wait to get started and I think I've chosen quite a good week. There's a lot going on. There's a lot going on in the markets, there's a lot going on in the politics of everything, and Matt's got some really interesting topics to talk on about big tech and semiconductor names. So, we're gonna start with a bang!
Matt
We certainly are. We'll kick us off with the recent local election. So, it's been a busy weekend in the UK, Anna, do you want to just talk us through what's happened. And I guess more importantly for our listeners, what this means for the markets?
Anna
Yeah, I mean, things are changing all the time. Where we are at the moment is we all thought the local election results were going to be pretty dire for Labour. And they were. And whilst the market didn't really do that much on Friday, it started to move a bit this week because the results seem to have really galvanized some of the MPs to start coming out in public and saying to Starmer that his time is up and then we've seen some parliamentary secretaries also do this, and just a general feeling that he's not going to be likely to be the prime minister that sees us through to the next election. What that means for the market is we worry about who's coming next and investors, whether they're international investors… And it's probably worthwhile thinking about actually, about 25 to 30% of UK government bonds are bought by international investors. So, it's important what both domestic and international investors think, because they can go anywhere. If investors feel that they can demand a higher what we call “risk premium” to be compensated for the risk that they're taking on by investing in a country's bonds, they will do. And we are seeing that. There is a concern that whoever comes to replace Keir Starmer, if someone does come to that, they may be further to the left. They may want to do more spending. And so, what does that mean for the UK's fiscal credibility. So, we've seen bonds really increase in yields. So, we've seen the ten-year gilt yield has gone from a low of 4.3% earlier this year to at the time of speaking, 5.1%. And that is quite a big ramp up. And it's all to play for when we think about what might be happening next.
Matt
And these bond yields are quite important on and off for companies and for consumers in terms of kind of those the yields at the low end of the curve. So, when we talk about ten years or 30 years, they are the ones that really start to impact some of those long-term borrowing costs. And I think we've seen some of that. We're recording on Tuesday today and we saw some that with the market moves this morning with the banks, Anna.
Anna
Yes, we've seen the banks, they were some of the biggest losers in the FTSE this morning. We see the higher borrowing costs make it harder for people to afford mortgages that they are normally priced at five years. But that five-year return has also had to go up. It's for companies too that are trying to borrow to invest, and it just increases any worries about interest payments for either households or companies not being sustainable. So, I think we are starting to see that hit confidence in the banks, which, Matt, I think have done quite well till now.
Matt
Yeah, I mean, the coming off a low base a few years ago. And I think actually it's interesting because the kind of good segway into the next topic, is that we've already seen some of the banks from their earnings over the last month or so, start to take on slightly higher provisions for potential bad debts in the future. Now, up until now, that hasn't really been focused on UK issues. Predominantly, it's largely been potential impacts on the Middle East, which is what we heard. But it would be interesting to see how that evolves over the next few months, into the next quarter. If these high yield environments continue in the UK, but just taking a shift over to the Middle East, Anna, we still seem to be in a stalemate, but equally yesterday when we record, which will be Monday, US markets reached all-time highs again?
Anna
They've been remarkably resilient and I think we should also say that the Middle East crisis is worrying investors about how much inflation is going to come through to the system. We've seen a little bit already. We've got more inflation numbers this week in the US. So, we are seeing inflation come up. But it's whether it gets embedded in the system. And that is another added concern. So, it's not just for example when we look at the UK it's not just the political problems that we're having. It's that broader global impact of higher energy costs and the Strait of Hormuz still not being open for business. So, you've got LNG shipments stuck there, you've got helium shipments stuck and fertilizer shipments. And these are all things are needed to make up for incredibly interconnected global economy, keep turning. But yet the markets are going up. And it's been a lot of those big cap names, hasn't it, Matt.
Matt
Yes, I think it's one of those things where there's obviously the worry and rightly so, about the higher inflation rates. Moving on, you know, oil staying over 100 for another month or a month after that. And the implications that's going to have, against this massive AI earnings tailwind that we're seeing come through. At the same time, at the minute, markets are kind of saying the oil price shock is going to be transitory and the AI earnings boom or wave is going to just simply last longer and is simply a bigger fish when it comes to the market. And I think that's one of the reasons why we're seeing them be more resilient. I also think, Anna, I think I mentioned this a few podcasts ago, but it does feel to me as if markets are just inherently more resilient at the minute than perhaps, they have been in the past. I don't know whether part of that is because we had all the tariff drama last year. Markets saw that actually, you know, it wasn't the end of the world. There were the lows that came pretty quickly. And then we had that V-shaped recovery again. And I don't know whether part of it is just that the markets of have seen some of this before and are now willing to just kind of, you know, glass half full approach. I don't know whether you've noticed Anna?
Anna
Yeah. I mean, I think that what happened last year is a really interesting point is what happened last year was we saw some major market disruption. I mean, we really did see dramatic falls in equity markets and then in bond markets, which really freaked people out because that's normally where you go to as your safe haven. And so, we saw some really big moves. And then Trump stepped in, President Trump stepped in and reversed some of the big tariffs that had been put in place. And that gave birth to that whole taco trade, which is Trump always chickens out. And so there is this feeling that what might be put in place and what the words won't be met with the actions. But I think the problem is in the situation we have there with the Iran war was, if you remember, he said it would be 2 or 3 weeks. We're in week ten, and most analysts will say it's not a linear thing. The longer this goes on, the worse it gets for prices. And so, I think the markets are resilient. I think, however, that what we're really seeing is, as you say, those AI driven earnings, they are really helping power those mega-cap names, which are just huge parts of most people's portfolios. They're because they're such big parts of the index. And so, if they're still doing well, and I think your research that you've been doing over the last reporting season has shown some remarkable earnings growth in these companies, that we don't really see what's going to make that sort of really come to an end at any time soon.
Matt
Yeah, I think I think so. If we look at the results from some of these names that we've had, I mean, just taking some of the biggest AI spenders here. So meta, Microsoft Amazon and Alphabet. So, these are the guys that are really put in the hundreds of billions of dollars into this AI revolution or whatever you want to call it, but double digit earnings per share growth across the group, all of them either in line or ahead of expectations, it was just another really strong quarter. Most of them aren't even single companies know you could split them out into 4 or 5 companies on their own, and they would all be giants. So, you know, these are real propellers of economic growth across not just the US but globally. So, it is really important that if you want to have sustained positive market momentum, that you do get that earnings growth from these large names.
Anna
The other aspect to this is, I suppose that people are looking at the picks and shovels, you know, everything that these big hyperscalers need to be able to further build out their AI capability. What are you thinking about the valuations of those stocks, whether it's a semiconductor stock or an energy stock or the other ones? We're seeing some pretty meteoric rises, aren’t we?
Matt
Yeah. So, if we just look at the kind of the semiconductor index, I mean, you know, within that you've got your Nvidia's report comes the companies that make the GPUs the chips to power this. But you've also got a huge supply chain that feeds into this. And you know, we've seen some really, really arguably crazy earnings forecast growth from some of these names just to go through a few here. So, from the start of this year the GPU names. So, the Nvidia, the Broadcom's we've seen earnings expectations over the coming next 12 months up 35% for that group. You know that's a big rise for companies.
Anna
And is that on top of some fairly well-established earnings expectations anyway? I mean so it's just growth building on growth.
Matt
Yeah exactly. Correct. And then you've got the kind of some of the CPU companies, these would have been the kind of chips that you get in your PCs. Or you do have some in some other devices as well. But when we had this AI evolution, Nvidia came out with the graphics processing unit, the GPU. Now historically that used to be for gaming PCs and things, and it would sit alongside the CPU. The GPU, and the accelerators were actually really core for early AI training. And, you know, that's just one of the reasons why we saw Nvidia earnings accelerate. We're actually now finding now is the CPUs, what we used to be the driving forces of old PCs, are actually also going to be equally as important in this AI build out. So, we've seen companies like Intel and AMD who are actually kind of arguably been written off a year or so ago for being the old technology. The earnings expectations for those companies are up 56% so far this year with this resurgence in the CPU. Another super interesting dynamic there. But then I think coming on to what you really meant, Anna, which is the memory companies - 386% next 12 months earnings growth. And that's just in the in the last five months. And again, that's coming off of some large numbers, anyway. This is the super interesting debate about this at the moment because these companies are normally what we would call very cyclical. Also, earnings go up and earnings come back down again. Now part of that is because making memory is quite difficult. Making more memory is very difficult. So what you normally have is demand will go up for, I don't know, a PC cycle or a smartphone cycle, and it will take a bit of time before new supply comes online and just exactly what we're seeing with oil prices at the moment when you don't have supply, but you do have demand, prices shoots up. What then happens is supply comes online, demand maybe stays flat or comes back down, and then those prices go back down again. So, you get this up down cycle for these memory names. What we're seeing at the moment is the huge up, because demand is going through the roof. Micron, of one of the major companies here, Micron’s CEO, came on a couple of weeks ago and said that they can only service 50 to 60% of their major customer demand for next year. So that kind of shows how much supply is needed and how little there is to service that.
Anna
When does that supply end up coming on then?
Matt
Yeah. Perfect question. So, there will be some coming on in 2027, some more around 2028. I think you have to build a factory. It's really difficult. You know, you have to have what's called a clean room. So, you know, you can't really have any dust or anything in there. It's like, you know, really complicated to bring it online.
Anna
Yep.
Matt
And the real question for these though is at the minute, this is still being priced, even though we've got that crazy 386% earnings growth, it's still being priced as if it's a cycle that's going to last 1 to 2 years. Now, the really interesting question from here is if this AI build out is bigger and longer than any of the previous cycles that we've seen, could we see a five-year cycle instead? And if so, that means that earnings expectations for 28, 29, 2030 are still too low for this cohort of companies, even though we've had this meteoric rise for earnings expectations across 26 and 27.
Anna
So, you could argue, actually that they still got further to run.
Matt
You could do. Yeah. So, this would be another way to look at this is earnings expectations have gone up. But multiples. So how much money you're willing to pay for a dollar. That earnings actually come down for the memory stocks.
Anna
That's interesting. That's fascinating despite that meteoric rise that they've seen. So that's just going to unfold. And we're going to see that clarity come through. Or does it depend on those big hyperscalers still coming out saying, I think they're talking about $750 billion to spend this year. Do we need them to say next year we're going to do this and more? Do we need that sort of that to continue? So, do we really need to see that whole the whole excitement about AI from the hyperscalers point of view continue?
Matt
Yeah, I mean, these guys are the biggest spenders. So, if they were to come out in 2028 and say, you know, we're gonna have to cut all of our budgets because we're not seeing the demand for it etc., then this is when you start to see those earnings expectations come back down. And this is what I said before about the cyclical nature of that memory trade that we normally see. The question, I guess, is how long does the build out last? Now I'm of the opinion that the market is still under appreciating how big and how long this buildup is going to go on for, and that leads potential, like I said earlier, for earnings expectations to still go up into the future. I mean, 2027 expectations for those four companies I mentioned before, it's just over 800 billion at the moment, which it seems like a crazy number, but I could see that number being higher as we go through the year. And I kind of take myself back to where we were in 2025, start of 2025, when CapEx numbers for these companies had already gone up 60%, and everyone's saying it can't go up again. And then, lo and behold, a quarter later they're pulling out another 60% growth into 2026, which we're seeing play out now.
Anna
Yeah.
Matt
And what we're hearing from these companies is that they still don't have enough supply to service all of their customers on the demand side. So, you know, we'll have to see how that plays out. But it's a dynamic that's very interesting and it's evolving so quickly.
Anna
Yeah.
Matt
And I think a really interesting point actually, Anna, is we often think that markets in the 21st century are completely kind of, you know…
Anna
Efficient?
Matt
That's the one. Yeah.
Anna
Yeah. So that they have absorbed all available information.
Matt
Exactly. But how can you have a 386% earnings increase for expectations if they have all the information? And how can you have the CPU companies from a year ago completely shift? Another example. Anna, I mean you've looked at alphabet recently in terms of the management of the company, another perfect example of a company where a year ago that was being written off as the loser of AI amongst these big companies.
Anna
Yes. Isn't that phenomenal? I mean, now they, I think everyone worried, didn't they, that when ChatGPT was released that people would just go to ChatGPT and say, find me a nice local restaurant and would stop using Google to find you a nice local restaurant. But actually, they've managed to really adapt, so quickly. So now if you notice, if you do go to Google, you'll have Gemini, which is their large language model. It will start producing the results that you would normally go to ChatGPT for. So, this all sounds quite positive, but I'm assuming that there are risks that we need to be aware of when you're holding some of these mega cat names?
Matt
Yeah. Exactly. Right. So, I think I mean, one of the main ones at the moment is that this AI build out loses steam. You know, if we don't get the kind of improvements that we want to see from the models, if potentially, you know, we start to go for a period where they plateau, then you might start to see some of the spending plans for these big tech companies come down, because they're not simply not getting the demand for it. So I think that's one of the key worries that the market has at the minutes with this is just how long does this build out last, and just how much economic value do we actually extract from all of these AI investments and models. So absolute key one there. Of course, each business will also have its own individual things to talk about. For example, you know, does search still get disrupted. At Alphabet there's regulatory hurdles, as for most of these companies. It's part and parcel of being a big tech company. But again, just ongoing risks that investors should think about. And I think one of these things I think was mentioned Anna is just to make sure that you do hold diversified portfolios.
Anna
Yeah, absolutely. So, you don't put all your eggs in one basket because as we've already said, these big companies are even quite significant weightings in index funds because of their very size. So, we always try and think about ourselves having a broad array of investments. So, you know, you might own several index funds and some active funds. You might individually own some shares. And on that note, I should note that I do individually own Nvidia. What about you Matt?
Matt
Yes, I own Microsoft, Nvidia and Meta.
Anna
Yeah, alongside a well-balanced portfolio, I hope.
Matt
Correct.
Anna
Matt, what do you think about potential upcoming IPO of anthropic? OpenAI, the maker of ChatGPT and SpaceX? Do you think they might absorb some of this investor enthusiasm that's going on elsewhere in the market?
Matt
Yeah, it's super interesting because one of the things that we've also seen is the valuations for these private market companies have gone absolutely skyrocketing over the past year or so. And, you know, they don't trade on public markets, but when they raise money in private markets, you get an idea as to what their valuation is going to be. And the numbers are being how strongly, you know, 800 billion, $1 trillion for the valuations of ChatGPT and Anthropic. There is a good question. Is there enough capital to absorb all of those market caps if they come online? I think the answer probably is yes. The real question is going to be how long does it last for? Because they're going to come on at crazy valuations. But then the growth numbers are also equally crazy. So, you know I don't know. I think that's anyone's question. But I think personally that the improvement in the models at the last five months has been better than anything we've seen over the last two years, in terms of their actual usefulness. And I feel like we're seeing that in enterprise adoption as well as on the consumer side. And this is one of the reasons why Anthropic stands so well.
Anna
Yeah, Anthropic is very much concentrating on the enterprise side. And I think that if Anthropic were listed enterprise software company, it would have been, you know, it would have been the fastest growing by far that's ever, ever existed. And the last couple of reporting seasons, the bot CEOs have been saying about, particularly ones that are software linked, how about how much code they can ship, how much Meta? I remember Mark Zuckerberg talking about how he doesn't need 20 coders now, he needs one really good coder and some coding agents. So, you know, you really are seeing amazing, strides being made in how much code can be written, how effective and efficient companies can be. So that's the use case coming through, isn't it? For AI.
Matt
There are certainly interesting times that we're living in now and things seem to be evolving, such a rapid pace. And another thing that we're hearing with the CEOs of these companies are saying it's the fastest pace of innovation that any of them have ever seen. And that's certainly something when you're talking about the CEOs of the biggest tech companies on earth. So yeah, it's going to be interesting to see what the future holds, Anna. I think that's going to be all for this week. This session was recorded on the 12th of May 2026, and all information was correct at the time of recording. Next week, Helen Morrisey and Claire Stinton will be back, and they'll be talking about the rise of the centenarian and how to fund the 100-year life.
Anna
Well sounds excellent? I'm already halfway through that, quite depressingly. Nothing in this podcast is personal advice. You should seek advice if you're unsure about what's right for you.
Matt
And investments can rise and fall in value. So, you could get back less than you invest from. Past performance is not a guide to the future.
Anna
As always, this is not a recommendation to buy, sell or hold any of the investments or companies we have discussed today. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
Matt
So, all that's left is for us to thank our producer, Elizabeth Hotson, and to thank you so much for listening. We'll be back again soon. Goodbye
Anna
Goodbye.