Barclays told investors in a note that recent geopolitical flare-ups should be seen as potential buying opportunities rather than a reason to retreat, arguing that markets remain underpinned by solid macroeconomic and earnings backdrops.
Analyst Emmanuel Cau wrote that "US-Iran tail-risks have increased lifting the oil risk premium," but added that "geopolitical flare-ups typically bring good buying opportunity, amid supportive macro & earnings fundamentals."
The bank also observed a reduction in AI-driven market turbulence. "AI hysteria has calmed down," Cau said, while noting that "growing Tech caution continues to fuel rotation into Europe." According to Barclays, single-stock volatility has eased after "sharp and erratic rotations earlier in Feb," creating space for dip buyers to re-enter the market.
Barclays reiterated that it had previously cautioned investors that "AI hysteria was looking increasingly overdone," and said recent price action indicates a reassessment of indiscriminate selling. The bank pointed to pockets of tactical attractiveness across the market, singling out technology valuations as an area that has materially compressed.
Specifically, Barclays wrote that "Global Tech sector valuations have compressed meaningfully," with relative valuation levels "at their lowest... post-Covid period." Despite persistent concerns about AI-led disruption and hyperscaler capex spending, the bank believes earnings momentum remains resilient and that the risk-reward profile for some areas has improved.
Those tech-related worries are also driving rotation into what Barclays described as "old-economy/ hard asset sectors," which in turn is contributing to a broader shift in investor flows away from the United States and toward other regions. The bank notes that EU equities have extended their year-to-date lead, helped in part by rebounds in sectors that had been caught up in the earlier "AI panic."
Looking ahead, Barclays flagged upcoming corporate results as an important near-term catalyst. The bank said that Nvidia's upcoming results will be a key event that "may deepen or reduce the current Big Tech uncertainty."
Clear summary
Barclays recommends treating recent geopolitical and AI-related market stress as potential buying windows, citing steady macro and earnings fundamentals, a decline in single-stock volatility, compressed tech valuations, and rotation into old-economy and hard-asset sectors. The bank also highlights forthcoming corporate results as possible catalysts for further market direction.