Boeing, Estée Lauder, and 5 Other Stocks for a Very Confusing Market

It’s been a wonky year for markets so far—but there may be several stocks to play it.

While the Federal Reserve has yet to give a clear signal it will pause interest rate hikes, many investors believe that rates will moderate in 2023 as the central bank works to fight inflation. As a result, stocks have rallied this year, with the S&P 500 up 9% andBig Tech companies generating stellar earnings results all in the face of bank worries and recession fears.

Several fund managers who attended the Morningstar Investment Conference are still looking for bargains—even though many economists such as Bank of America’s Michael Gapen see a case for a mild economic slowdown in 2023. The managers are focused on players in the aerospace industry, given the healthy outlook for travel, and companies with strong pricing power that can weather big swings in consumer demand.

Fidelity Investments portfolio manager Matt Fruhan during a panel on Wednesday said that he’s bullish on U.S. commercial aerospace firms such as Boeing (ticker: BA) and General Electric Company (GE). Passenger air traffic is growing and “we are still in the recovery phase of covid,” said Fruhan, who has been investing in the theme for the past 12 months to 18 months.

Demand for air travel in February—as measured by revenue and distances flown—rose 55.5% versus a year ago, according to the latest air traffic report from the International Air Transport Association, which represents some 300 airlines. That figure, however, is still lower than pre pandemic levels, matching about 85% of global traffic witnessed in February 2019.

Besides the U.S. names, Fruhan also likes French aerospace supplier Safran (SAF.France). It’s an engine manufacturer that also sells units like seats and lavatories and offers repair services, adding a recurring revenue stream.

Nate Velarde, co-portfolio manager of the Chautauqua International Growth Fund, bought Safran shares in 2022. He sees the proliferation of low-cost airlines as a tailwind—and is impressed by the company’s successive price increases in its spare parts business in 2021 and about 10% in November last year.

“Given the broad environment we are faced in, you need to find companies that have the ability to protect margins [through] pricing power,” Velarde told Barron’s at the conference.

Spencer Adair, a portfolio manager and partner at Baillie Gifford, says luxury cosmetic brand stocks are the best examples of pricing power, given makeup stands as “absolutely critical” in any macro environment.

One of his favourites: Estée Lauder (EL), which was a Barron’s pick last year. Shares are down 0.6% so far this year: Results for the December ended quarter showed prolonged Covid-19 lockdowns affected foot traffic at bricks-and-mortar stores in China. However, Adair expects these headwinds to abate, as China’s reopening gathers steam and Estée Lauder accelerates its direct to consumers sales.

Adair, who manages the nearly $300 billion investment firm, also likes Japanese skincare brand Shiseido (SSDOY), which reported a 6% drop in its China business last year. Adair cited demand from Chinese travellers, who are known for their interest in multi-step skincare regimens, as a tailwind.

Natasha Kuhlkin, a large-cap growth equity portfolio manager at Jennison Associates, sees strength in global luxury consumer brands. While sitting on a panel about the disruption of growth stocks with Adair and Fruhan, Kuhlkin named LVMH Moët Hennessey Louis Vuitton (LVMUY) and athleisure brand Lululemon Athletica (LULU). “There’s a controlled supply” of these companies, she said, adding that they “are starting to appeal to more consumers.”

Lululemon trades at 31.6 times forward earnings, lower than its 40.5 times five-year average. LVMH, meanwhile, is trading at 25.6 times nearly matching its average five-year price-to-earnings ratio.

Ultimately, it’s all about customer demand and how far can people stretch their frugality. Switching to a cheaper laundry detergent may work for some, but quitting on their go-to-gym leggings might be asking too much—giving companies with pricing power a leg up.

A sharp technology sell-off has exposed a new anxiety on global markets: whether the enormous borrowing behind the artificial-intelligence infrastructure boom can generate sufficient returns as interest rates rise and Chinese competition intensifies.

The artificial-intelligence investment boom has powered technology shares, semiconductor manufacturers and data-centre operators to extraordinary heights. Last week, investors were given a reminder that much of this expansion is being built with borrowed money.

The technology-heavy Nasdaq Composite fell 4.5 per cent over the week ended October 16, its weakest performance since late June. Semiconductor shares suffered an even deeper correction, with the Philadelphia Semiconductor Index losing about 11.4 per cent.

The selling spread quickly through global markets. Micron Technology fell 14.6 per cent over the week, while South Korea’s Samsung Electronics and SK Hynix dropped approximately 18 per cent and 24 per cent respectively.

This was more than a routine bout of profit-taking. Investors were reassessing three interconnected risks: higher interest rates, the rapidly expanding debt burden attached to AI infrastructure and the prospect of stronger competition from Chinese memory-chip manufacturers.

The debt behind the AI build-out

Artificial intelligence requires a physical infrastructure network of enormous scale. Data centres must be built, advanced processors purchased, power supplies secured and cooling systems installed before customers begin generating meaningful revenue from them.

Technology companies are increasingly supplementing their own cash with corporate bonds, syndicated loans, equipment leases, private credit and project-level financing.

JPMorgan describes the emerging funding model as a combination of conventional corporate borrowing and project finance tied to individual data-centre assets. In Australia, the Reserve Bank estimates that syndicated loans accounted for approximately three-quarters of data-centre financing during 2025 and 2026 to date.

The numbers are becoming large enough to affect broader credit markets. The Federal Reserve Bank of Dallas has cited Wall Street estimates suggesting AI-related investment-grade bond issuance could approach US$300 billion in 2026 alone.

That borrowing is not automatically problematic. Debt can be an efficient way to finance long-lived infrastructure when future revenue is sufficiently predictable. The concern is that AI technology, customer demand and computing economics are changing much faster than the repayment schedules attached to the assets.

A data centre financed today may carry debt for years. Investors must therefore make assumptions about future utilisation rates, electricity prices, chip performance, customer concentration and the amount businesses will ultimately pay for AI computing.

When interest rates rise, those assumptions become less forgiving.

Inflation changes the calculation

September’s US inflation data intensified the pressure. Consumer prices increased 3.7 per cent over the year, ahead of market expectations and up from 3.4 per cent in August.

The hotter reading reduced confidence that interest rates would fall quickly and pushed bond yields higher. That matters particularly for companies whose valuations depend on profits expected well into the future, as well as highly leveraged infrastructure operators that may need to refinance.

CoreWeave has emerged as a closely watched test case. The specialist cloud-computing company has accumulated substantial debt and lease obligations to build AI capacity, while relying on a concentrated group of large technology customers.

Its shares fell sharply during the sell-off, while the cost of insuring its debt against default climbed. CoreWeave has argued that its contracted backlog more than covers its obligations and that financial markets do not always understand its business model. Nevertheless, its securities have become a proxy for investor confidence in debt-funded AI infrastructure.

Oracle, another major investor in AI computing capacity, fell 8.8 per cent in Friday trading, while CoreWeave dropped 15.5 per cent.

The question is shifting from how much AI infrastructure can be built to how profitably it can be operated.

China adds another source of pressure

Interest rates were not the only catalyst. Reports of advances by Chinese memory-chip producer ChangXin Memory Technologies raised concerns that lower-cost Chinese products could increase competition across the global semiconductor industry.

Memory chips are essential to AI systems, but the industry is historically cyclical. Periods of tight supply and high pricing can encourage rapid investment, eventually producing oversupply and falling margins.

The prospect of a well-funded Chinese competitor expanding its technological capabilities unsettled investors in Samsung, SK Hynix and Micron. It also demonstrated that AI-related demand does not insulate chipmakers from conventional competitive pressures.

That combination—slower rate cuts, more expensive financing and potentially cheaper supply—challenged the assumption that every company exposed to AI would enjoy continually expanding margins.

A reset rather than the end of the boom

The sell-off does not establish that the AI boom is ending. Demand for computing power remains strong, the largest technology companies continue to generate formidable cash flows and many infrastructure projects are backed by long-term customer contracts.

What has changed is the market’s willingness to overlook the price and financing structure of that growth.

The most resilient companies are likely to be those able to fund investment from operating cash flow, secure long-duration customers and demonstrate that new capacity will earn returns comfortably above its financing costs.

More speculative operators may face greater scrutiny, particularly where debt is expensive, customers are concentrated or expected revenue depends on demand that has not yet materialised.

For Australian investors, the lesson extends beyond US technology shares. Local data-centre operators, infrastructure funds, electricity suppliers and property groups are increasingly exposed to the same investment cycle.

Artificial intelligence may remain one of the defining growth themes of the decade. But last week’s correction showed that enthusiasm for the technology does not eliminate financial discipline.

The next stage of the AI boom will be judged not only by computing power, model performance or demand for chips, but by something more traditional: whether the assets being financed can generate enough cash to repay the money borrowed to build them.

Fact box

Nasdaq Composite: Down 4.5 per cent for the week ended October 16, 2026

Philadelphia Semiconductor Index: Down approximately 11.4 per cent

Micron Technology: Down approximately 14.6 per cent

Samsung Electronics: Down approximately 18 per cent

SK Hynix: Down approximately 24 per cent

US September inflation: 3.7 per cent annually

Estimated 2026 AI-related investment-grade issuance: Approximately US$300 billion