Polish companies’ earnings are supporting valuations on the Warsaw Stock Exchange, while artificial intelligence is reshaping investment prospects across the technology sector. A closer assessment of domestic inflation could nevertheless prompt Poland’s Monetary Policy Council to raise interest rates again.
Analysis featuring Fryderyk Krawczyk, Marek Kaźmierczak, Alan Witczak and Michał Szymański of VIG / C-QUADRAT TFI.
AI is driving shifts beneath the broad market
Fund manager Alan Witczak noted that relatively calm US benchmark indices can conceal substantial shifts between technology segments. For software companies, AI brings both tougher competition and opportunities to make their own operations more efficient.
The experts highlighted presentation data showing higher revenue per employee in this group and scope to cut costs using new tools. Companies’ data resources also matter: combining them with AI models can support product development and strengthen competitive advantages. Assessing software producers therefore requires consideration of both threats to existing business models and opportunities to improve profitability.
Technological capabilities are advancing faster than adoption
A central theme of the meeting was the gap between AI models’ growing capabilities and the pace at which businesses and consumers adopt them. VIG / C-QUADRAT TFI’s experts believe technological progress is outpacing the spread of applications that would exploit its full potential, creating a “diffusion gap”.
“The market often overestimates the benefits of technological development in the short term and underestimates them over the longer term. That happened with the internet: the technology continued to develop, but at one point investors’ expectations went too far. Today, too, we must distinguish technological progress from what is already priced in. AI capabilities are growing faster than its use, and this is one source of market nervousness. The question is therefore not only whether the technology is developing, but also whether the pace of adoption is keeping up with valuations,” said Michał Szymański, CEO of VIG / C-QUADRAT TFI.
Meanwhile, the cost of carrying out particular tasks using AI is falling, with models’ self-improvement also playing a role. Efficiency gains raise questions about future computing demand relative to planned infrastructure expansion. Strong demand today does not rule out excess capacity in subsequent years.
Witczak does not see this as an exhaustion of AI’s investment potential. Instead, the companies benefiting most may change. Cheaper access to models could favour software and application providers and their users, making the ability to convert technology into savings, new services and revenue increasingly important.
“AI value is moving from the infrastructure layer towards software. The market will look for where and how to capture value from the investments already made in AI,” Witczak said.
The experts also noted that energy constraints and delays in building data centres could postpone excess computing capacity. Funding sources remain important when assessing infrastructure companies. Businesses reliant on external capital differ from large technology groups able to finance investment from cash flows generated elsewhere in their operations.
Polish earnings help justify higher valuations
Following this year’s gains, Warsaw equities are no longer cheap relative to their own history. The data presented showed that on October 23 the WIG index’s price-to-book ratio was 61.5% above its ten-year average. The experts stressed that the size of this premium alone does not determine the market’s next direction: the key question is whether earnings are improving alongside valuations.
Senior fund manager Marek Kaźmierczak argued that rising profits and profitability provide substantial support for higher Polish equity valuations. Poland compares favourably with some Western European markets in this respect. The experts pointed to structural problems in Germany and France, including difficulties in industries that are important to their stock indices.
“There is no reason to throw Polish equities out of portfolios. We have a good combination of valuations and growth,” Kaźmierczak said.
The presentation put WIG’s price-to-book ratio at 2.1, compared with 2.0 for Germany’s DAX and 1.9 for France’s CAC 40. Such comparisons must account for differences in sector composition and corporate profitability. As participants emphasised, higher margins at US technology companies help explain their valuation premium over other market segments.
Foreign inflows and overseas expansion
Foreign capital inflows remain supportive of Warsaw equities. The experts believe Poland can benefit when problems in selected emerging markets lead investors to seek alternative destinations within the same market group. The relationship between Polish company valuations and prospective earnings growth is important.
They also described a potential countervailing mechanism: after strong gains, investors may reduce their exposure to Poland to restore intended portfolio weights. This need not reflect a deteriorating view of Polish companies or a desire to realise this year’s profits.
The meeting also addressed Polish companies’ international expansion. The investment firm compared WIG’s performance with a basket of companies expanding abroad. Covering several industries, the analysis highlighted overseas markets as a source of business growth.
Banks remain profitable despite risks
For banks, the experts emphasised the close relationship between financial results and share-price performance. They considered current Polish bank earnings and loan-book quality to be sound.
The sector nevertheless faces tax and regulatory pressure. Risks also include a possible lending slowdown and the consequences of rising bond yields. Higher funding costs can make debt servicing and refinancing harder for borrowers and eventually affect bank loan quality.
Investment supports Poland’s growth outlook
VIG / C-QUADRAT TFI sees grounds for continued economic growth over the coming quarters, through mid-2027. Public investment, particularly spending linked to Poland’s National Recovery Plan and the EU’s SAFE programme, remains a significant driver. Uncertainty and financing costs constrain private investment growth.
Consumption continues to support activity, but the experts see signs of a slowdown. Households are cautious about major purchases, while slower wage growth limits scope for substantial spending increases.
Recovering credit demand also supports the economy. Its course will depend partly on the cost of money. The experts expect demand to remain elevated if rates are stable, while rate increases could gradually weaken its growth.
Food prices may cease to restrain inflation
Although fuel currently accounts for much of the inflation pressure, its composition could change over the coming quarters. Food prices, which helped contain inflation this year, may cease to play that role.
The experts highlighted harvests’ influence on subsequent prices. They expect the beneficial effect of last year’s good harvests to fade, while weaker harvests this year could increase food-price pressure in 2027. Calmer fuel markets would therefore not necessarily bring an equally rapid decline in the overall consumer price index.
They stressed that the situation differs from the 2022 inflation shock. They do not yet see comparable second-round effects, in which an initial price shock spreads to other prices and wages. Easing wage pressure and consumer caution reduce the risk of persistent inflation.
A scenario of two rate increases
VIG / C-QUADRAT TFI’s representatives expect two interest-rate increases over five months. This lies between the unchanged-rate scenario attributed to the economists’ consensus cited at the meeting and forward rate agreement pricing that incorporated four increases by the first half of 2027.
“There is a large gap between economists’ forecasts and derivatives-market pricing. The consensus assumes unchanged interest rates, while the market prices in four increases. Our scenario envisages two increases over the next five months. The forthcoming inflation projection will be important: if it shows inflation failing to return to target over its horizon, that will support adjusting rates. At the same time, moderate consumption and easing wage pressure argue against sharp monetary tightening. In our view, two moves could be sufficient, after which the Council would assess their impact on the economy and inflation,” explained Fryderyk Krawczyk, investment director at VIG / C-QUADRAT TFI.
The case for a response by the Monetary Policy Council includes the risk of inflation remaining above target and a renewed rise in bond-market inflation expectations. The forthcoming inflation projection will provide a key reference point. Difficulty returning inflation to target within its horizon could open a discussion about raising rates.
An early response would aim to stabilise expectations; de-anchoring could increase the adjustment needed later. The firm does not currently expect an aggressive tightening cycle. Its scenario envisages two moves followed by an assessment of their economic and inflation effects.
Bond yields and fiscal pressure
Rising domestic bond yields have made some securities more attractive. The experts highlighted five-year debt, which suffered in another wave of selling. They cautioned, however, that substantial issuance could continue to weigh on prices.
For longer maturities, oil prices, inflation expectations and public finances remain important. Poland’s bond market reacted more strongly to renewed tensions than some regional peers, which the experts linked to high borrowing requirements and little prospect of rapid fiscal consolidation.
They believe the high premium on long-dated bonds could attract demand and support a short-term rebound. That would not remove structural pressures. Persistently high deficits could continue to increase the compensation investors require to finance the state over the longer term.
Original Polish article, November 2, 2026. English editorial translation.
