Singapore Equities: AI Indigestion Creates Opportunities in Semiconductors and Commodities November 14, 2026
Brief Overview
Singapore equities endured a difficult month in October 2026. The Straits Times Index pulled back 5.3%, marking the steepest monthly decline since the 17% rout in March 2020. Cyclicals and commodities bore the brunt of the de-risking, alongside retreating banks. Conversely, Jardine Group counters led gainers. The Next50 mid-cap index shed 7%, while REITs proved resilient, easing just 1%.
De-risking across AI exposures has weighed on global cyclicals, with a spike in AI equity and debt issuance pushing investors to reduce their exposure and concentration in the sector. Semiconductor stocks corrected 15%, while credit default spreads and borrowing costs rose sharply. Despite this, memory prices and GPU lease rates do not reveal any tapering in infrastructure demand.
We remain positive on cyclicals, specifically semiconductors and commodities. Their multiples have de-rated, but earnings growth remains intact. The unwinding of the AI trade has capped interest rates, although the risk of another rate hike in December persists. Banks offer pricing power as interest rates firm up, with volume growth from loan expansion of 13%.
Investment Positives
AI infrastructure buildout remains firmly on track
Hyperscalers remain committed to the buildout of AI infrastructure. Amazon has described AI as a once-in-a-lifetime opportunity. Its data centre capacity is largely sold out in 2027, with a good chunk sold in 2028. The negative free cash flows reported by hyperscalers are a symptom of the cycle: upfront capital expenditure needs to be incurred in building data centres before the revenue streams in. Data centre capital expenditure is expected to spike 45% to around US$1.2 trillion.
No sign of demand weakness in underlying indicators
Memory prices are still reaching new highs, and GPU lease rates show no sign of obsolescence or tapering. These are critical indicators for infrastructure demand, and both remain robust. We note that the AI adoption cycle is in its infancy, with physical infrastructure still being built out. In our view, it is hard to be an AI train wreck if it is so well telegraphed.
Underlying AI demand is tremendous
The strength of underlying demand for AI is illustrated by the 11-fold jump in Anthropic’s revenue in the first nine months of 2026. Anthropic counts 11,900 substantial enterprise customers. This is still modest compared with the broader market opportunity implied by Salesforce’s 150,000 customers, suggesting significant room for further penetration.
Semiconductor earnings growth intact
Semiconductors plunged 24% in October, but we see this as an opportunity. The earnings recovery only began early this year. Singapore semiconductor companies have an added earnings driver from new programmes as front-end equipment makers widen their supply chains. Hence, our semiconductor picks are Frencken and JEP.
Commodities offer value
Commodities dropped 20% in Oct, presenting another opportunity. Geo Energy is highlighted as a beneficiary, riding on expanding volumes, firmer prices and lower costs.
Banks retain structural strengths
While banks face near-term headwinds, wealth management fees are robust and interest income is bottoming. Banks offer pricing power as interest rates firm up, with volume growth from loan expansion of 13%.
Historical precedent supports resilience
During the dot-com boom (1995 to 2000), the market faced multiple drawdowns, including a 26% contraction over three months in 1998. The Nasdaq is currently approximately 8% below its peak, which suggests that selloffs do occur in bull markets and do not necessarily signal the end of the cycle.
Investment Challenges
AI de-risking is weighing on cyclicals
The spike in AI equity and debt issuance has pushed investors to reduce their exposure and concentration in the sector. Hyperscalers are tapping more than US$400 billion in debt. Credit default spreads have been rising since October 2025, and borrowing costs have increased sharply. This de-risking has weighed heavily on global cyclicals and Singapore equities alike.
AI proliferation disrupts parts of the technology ecosystem
The proliferation of AI is starting to hurt other parts of the technology ecosystem. AI agents are disintermediating traditional search, while soaring memory prices are dampening PC hardware and software demand.
Valuations remain elevated
On an earnings yield basis, valuations are expensive. Even after the Oct sell-down, valuations remain above the historical mean.
Banks face near-term headwinds
Banks are contending with trading losses and the threat of a provisioning cycle in Indonesia. These headwinds may weigh on near-term performance, even as structural positives such as wealth management fees and firming interest income persist.
Risk of further rate hikes
The unwinding of the AI trade has capped interest rates for now, but the risk remains of another rate hike in December. This could affect market sentiment.
Outlook
We believe the AI adoption cycle is in its infancy, with physical infrastructure still being built out. Hyperscaler capital expenditure commitments remain strong, and underlying demand indicators such as memory prices and GPU lease rates are holding firm. The correction in Oct has de-rated multiples for cyclicals and commodities, but the earnings growth trajectory remains intact. The broader risk environment includes elevated valuations, rising credit default spreads, and the possibility of further rate hikes.
Everything corrected in October except bonds. Across major sectors, all were in the red except REIT-retail. Technology and Indonesia-exposed names suffered the most. However, REITs demonstrated resilience, easing just 1% during the month.
Recommendation
Phillip Securities Research remains positive on cyclicals, specifically semiconductors and commodities. Our semiconductor picks are Frencken and JEP, based on intact earnings growth and additional earnings drivers from new programmes. Geo Energy is highlighted among commodities for its expanding volumes, firmer prices and lower costs. Banks retain medium-term appeal through pricing power, loan expansion of 13% and robust wealth management fees, even as near-term headwinds from trading losses and Indonesian provisioning risks persist.
Frequently Asked Questions
Q: What happened to Singapore equities in October 2026?
A: The Straits Times Index fell 5.3%, the steepest monthly decline since March 2020. Cyclicals and commodities were hit hardest, the Next50 mid-cap index shed 7%, and banks retreated. REITs were resilient, easing just 1%.
Q: What caused the sell-off in October?
A: De-risking across AI exposures weighed on global cyclicals. The spike in AI equity and debt issuance pushed investors to reduce their exposure and concentration in the sector. Semiconductor stocks corrected 15%, and credit default spreads rose sharply.
Q: Is there evidence that AI infrastructure demand is weakening?
A: No. Memory prices are still reaching new highs, GPU lease rates show no sign of obsolescence, hyperscaler data centre capacity is largely sold out through 2027, and data centre capital expenditure is expected to spike 45% to around US$1.2 trillion.
Q: Which stocks does Phillip Securities Research favour?
A: Our semiconductor picks are Frencken and JEP. Among commodities, Geo Energy is highlighted for its expanding volumes, firmer prices and lower costs.
Q: What is the outlook for Singapore banks?
A: Banks face near-term headwinds from trading losses and the threat of a provisioning cycle in Indonesia. However, wealth management fees are robust, interest income is bottoming, and banks offer pricing power as interest rates firm up, with volume growth from loan expansion of 13%.
Q: How does the current market environment compare with historical precedents?
A: During the dot-com boom (1995 to 2000), the market faced multiple drawdowns, including a 26% contraction over three months in 1998. The Nasdaq is currently approximately 8% below its peak, suggesting that selloffs can occur within bull markets.
Q: Are Singapore equity valuations attractive after the sell-off?
A: On an earnings yield basis, valuations remain expensive. Even after the October correction, valuations are above the historical mean.
Q: How is AI proliferation affecting the broader technology sector?
A: AI agents are disintermediating traditional search, while soaring memory prices are dampening PC hardware and software demand, hurting other parts of the technology ecosystem.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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About the author
Paul Chew
Paul has more than 25 years of experience as a fund manager and sell-side analyst. He currently covers sectors such as healthcare, electronics, telecommunications, conglomerates, small caps, and strategy.
He graduated from Monash University and has completed both his Chartered Financial Analyst and Australian CPA programme.
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