Core Viewpoint - The communication equipment sector has shown strong performance, with a 31.4% increase since the beginning of the year, driven by the growth in AI hardware demand and the development of domestic and overseas computing chains [2][6][20]. Group 1: Market Overview - As of August 8, 2025, the SW communication index has risen by 21.4% since the start of the year, indicating a robust market performance [6]. - The capital expenditure of the three major telecom operators is projected to decrease by 9.1% year-on-year to 289.8 billion yuan, with a continued focus on computing networks [5][19]. - The mobile internet traffic reached 186.7 billion GB in the first half of 2025, reflecting a year-on-year growth of 16.4% [5]. Group 2: AI Hardware Trends - The demand for AI hardware is expected to grow significantly, driven by advancements in large model capabilities and the increasing number of application scenarios [2][20]. - The introduction of new AI ASIC technologies is anticipated to enhance the penetration rate of cost-effective and low-power AI chips [4][29]. - The global AI server market is projected to reach approximately $300 billion in 2025, with a year-on-year growth rate of 46.1% [31]. Group 3: Domestic and Overseas Computing Chains - The domestic computing chain, primarily serving local cloud service providers, is expected to see substantial growth, with capital expenditures in data centers projected to reach nearly 400 billion yuan by 2025 [18][19]. - The overseas computing chain has also shown resilience, with major cloud service providers exceeding capital expenditure expectations, indicating a recovery in AI hardware demand [7][13]. Group 4: Policy and Strategic Opportunities - The upcoming "15th Five-Year Plan" is expected to emphasize digital infrastructure and the digital economy, which will drive growth in sectors such as marine economy and military communication [21][22]. - The marine economy is gaining strategic importance, with government support for offshore wind power and submarine cable construction [23][24]. - The military communication sector is poised for growth due to accelerated satellite internet deployment and increased demand for information technology in defense [26][27]. Group 5: Technological Advancements - The penetration of silicon photonics technology is expected to increase significantly, enhancing the performance and efficiency of optical modules [38][39]. - Co-Packaged Optics (CPO) technology is anticipated to gain traction, providing higher bandwidth and lower power consumption, although challenges remain before widespread adoption [41].

Core Viewpoint - The article suggests that the worst phase of the economic fundamentals may have passed, with expectations for a recovery in the U.S. economy and increasing inflationary pressures. Policy shifts are expected to support consumer and business confidence in the second half of the year, while global markets, particularly in Europe, are anticipated to continue their recovery [2][6][17]. Economic Fundamentals - The U.S. economy has faced negative policy shocks since the beginning of the year, disrupting the recovery initiated by the Federal Reserve's rate cuts last September. Private consumption contributed 0.31 and 0.98 percentage points to GDP in Q1 and Q2, respectively, compared to an expected 1.87 percentage points in 2024 [6][9]. - Manufacturing PMI in the U.S. has been declining since February, reflecting a broader global economic slowdown due to policy headwinds [6][9]. - The article anticipates that the economic fundamentals may improve in the second half of the year, driven by fiscal stimulus and a stable labor market, which could lead to a new wage growth cycle [14][15]. Policy Environment - The article notes a shift from policy headwinds to tailwinds, with tariff uncertainties diminishing and tax cuts being implemented. This is expected to boost consumer and business confidence in the latter half of the year [2][9]. - The U.S. Treasury is projected to issue approximately $1 trillion in net debt in Q3, which may tighten liquidity and suppress risk asset performance [2][20]. Inflation Outlook - Inflation in the U.S. is expected to rise as the low base effect ends and tariffs are implemented. The article predicts a noticeable acceleration in inflation trends in the second half of the year [15][20]. Global Market Dynamics - The article highlights that the weak dollar cycle is beneficial for emerging markets, particularly Hong Kong stocks. Historical trends show that improvements in fundamentals and currency appreciation positively impact risk asset performance [3][33]. - The article also discusses the potential for a global market recovery, with expectations for multiple markets to perform well rather than just the U.S. stock market [26][28]. Sector Analysis - The article expresses optimism for sectors such as manufacturing, military, energy, and infrastructure in the U.S. and Europe, which are expected to maintain high levels of activity and support resource prices like copper and aluminum [2][28]. - The financial sector is also seen as having investment value due to liquidity expansion and financial deregulation [28][40]. Currency and Asset Valuation - The anticipated depreciation of the dollar and the return of pending foreign exchange funds are expected to support the appreciation of the Chinese yuan [3][30]. - The article suggests that the weak dollar environment will favor growth-oriented stocks in both A-shares and Hong Kong markets, particularly in technology and materials sectors [33][49]. Bond Market Insights - The article notes that short-term market sentiment is currently driving bond market fluctuations, with a potential for increased volatility in the bond market due to strong performance in risk assets [50][56]. - It is expected that the long-term bond yields may trend upwards due to the issuance of new debt and economic recovery, but there remains potential for a downward adjustment in yields if the Federal Reserve resumes quantitative easing [56][58].

Core Viewpoint - The recent surge in the Shanghai Composite Index, reaching a nearly four-year high, is attributed to increased trading volume and a favorable market environment, indicating a potential continuation of the upward trend in the A-share market [2][3]. Group 1: Market Performance - On August 13, the Shanghai Composite Index closed at 3683 points, marking a 0.48% increase and surpassing the previous year's high, with trading volume exceeding 2.1 trillion yuan [2]. - Growth and small-cap stocks have shown strong performance, with the CSI 2000 and CSI 1000 indices rising by 1.04% and 1.45% respectively, while the ChiNext Index surged by 3.62% [2]. - Sectors such as telecommunications, electronics, high-end manufacturing, and innovative pharmaceuticals have outperformed, while banks, coal, and food and beverage sectors lagged [2]. Group 2: Factors Driving Market Strength - The strong performance of the A-share market is driven by several factors: 1. Improved market liquidity and attractiveness of the stock market due to increased household savings and a shift in investor sentiment [3]. 2. A projected end to four consecutive years of declining earnings growth, with an upward revision of the 2025 A-share earnings forecast to 3.5%, indicating a positive shift in corporate profitability [3]. 3. A decrease in external uncertainties, highlighted by a recent U.S.-China joint statement and lower-than-expected U.S. CPI, which enhances the outlook for Chinese assets [3]. Group 3: Future Outlook and Investment Strategy - The current market sentiment suggests that the ongoing rally may resemble an "enhanced version of 2013," with expectations of better overall performance compared to that year [4]. - The recommendation is to focus on sectors with high growth potential and verified performance, such as AI, innovative pharmaceuticals, military industry, and non-ferrous metals, as well as financial sectors like brokerage and insurance that benefit from increased retail investment [4].

Core Viewpoint - The article highlights several new phenomena in credit and financial data for July, indicating a trend of private deleveraging and government leveraging in the second half of the financial cycle, influenced by seasonal factors [2][4]. Group 1: Credit and Financial Data Trends - Social financing (社融) continued to accelerate while credit remained weak, with new social financing reaching 1.16 trillion yuan, an increase of 389.3 billion yuan year-on-year, and a slight rise in growth rate from 8.9% in June to 9.0% in July [4]. - New credit in July was -50 billion yuan, showing a significant change compared to June, reflecting seasonal loan issuance patterns and local debt replacement impacts [4][5]. - Despite weak credit data, loan interest rates remained stable, indicating a shift in financial institutions' operational philosophy towards prioritizing asset quality over merely increasing loan volume [5]. Group 2: Financial Investment and Deposits - The active financial investment environment contributed to a significant increase in non-bank deposits, which reached 2.14 trillion yuan in July, a year-on-year increase of 1.39 trillion yuan [6]. - The increase in non-bank deposits is consistent with previous months, suggesting heightened financial investment activity in the private sector amid declining deposit rates [6]. Group 3: Monetary Supply and M1/M2 Trends - M2 growth rate reached 8.8% year-on-year in July, supported by accelerated fiscal spending, with a month-on-month annualized growth rate of 12.8% [6]. - M1 growth rate increased to 5.6% year-on-year in July, with a month-on-month annualized growth rate exceeding 6%, influenced by active financial investment and low base effects from previous months [7]. - The article anticipates that the year-on-year growth rate of monetary supply will likely continue to improve in the third quarter, with M2 potentially exceeding 9% and M1 around 6% [8].

Core Viewpoint - The article indicates that the U.S. inflation is entering a structural upward phase, with core CPI rebounding to over 3%, moving further away from the Federal Reserve's 2% target, which may increase internal disagreements within the Fed regarding policy decisions [2][5][6]. Inflation Data Summary - In July, the core CPI adjusted month-on-month increased by 0.3%, and year-on-year rose from 2.9% to 3.1%, exceeding market expectations. Overall CPI increased by 0.2% month-on-month and remained at 2.7% year-on-year, slightly below expectations [2][5]. - The inflation characteristics in July showed moderate goods prices and a rebound in services. Tariff costs are still being passed on to consumers, but some prices have started to decline [3][4]. Goods Price Analysis - The core goods price index increased by 0.2% month-on-month, consistent with the previous month. Notable increases were seen in furniture (+0.9%), curtains (+1.2%), and audio-visual equipment (+0.8%). However, some previously rising categories like appliances (-2.2%) and men's clothing (-1.3%) showed weakness [3]. - Used car prices rebounded to a month-on-month increase of 0.5%, while new car prices stabilized, indicating a potential shift in pricing strategies by manufacturers due to institutionalized tariff policies [3][5]. Services Price Analysis - The supercore price index, excluding rent, increased by 0.5% month-on-month, with significant contributions from previously declining airfares, which surged by 4%. This suggests a stabilization in travel activities [4][5]. - Other service prices, including vehicle maintenance (+1.2%) and medical services (+0.8%), continued to rise, indicating persistent inflationary pressures in the service sector [4]. Overall Inflation Outlook - The July CPI data does not alter the outlook for U.S. inflation, which is expected to rise structurally. The effects of tariff cost pass-through are anticipated to become more evident in the coming months, with core goods inflation facing upward risks [5][6]. - The Fed may struggle to reach a consensus on policy direction due to the mixed signals from inflation data, leading to increased volatility in the market [6].

Core Viewpoint - The global large model industry continues to develop rapidly post "DeepSeek innovation heat," with an acceleration in model iterations and an increase in computing power demand driven by token consumption [2][7][25]. Group 1: Global Model Updates and Computing Demand - In Q2 2025, major model companies like Google and OpenAI released significant updates, including OpenAI's GPT-5, which improved efficiency and reduced API costs, thus increasing computing power demand [3][13][25]. - The release of GPT-5 marked a shift towards efficiency, with a notable reduction in token consumption and a context window expansion to 400K tokens, enhancing application capabilities and driving further demand for computing resources [18][22][25]. - The North American model updates have created a preliminary closed loop in computing power demand, with companies like Google and Anthropic seeing rapid increases in token consumption [3][30]. Group 2: Domestic Model Development and Market Dynamics - Domestic companies, while still trailing behind in model capabilities, have made significant strides since 2025, with firms like ByteDance and Kimi releasing updated models that have increased computing power consumption [4][36]. - The domestic AI chip industry is evolving from single-chip solutions to system-level designs, supporting the iteration and deployment of large models [4][43]. - The anticipated updates from open-source models like DeepSeek in Q3 2025 could reignite investment sentiment in the domestic AI industry [4][36]. Group 3: Token Consumption Trends - Token consumption has surged globally, with major players like Google, Microsoft, and ByteDance experiencing significant increases in token usage since 2025 [27][30]. - Google's AI Overview feature has been a key driver of its token consumption growth, leveraging its vast user base to generate high-frequency AI summaries [30][31]. - The current market dynamics reflect a balance between free access to AI technologies and the monetization of high-value applications, with paid products showing a clear differentiation in performance and reliability [34][35]. Group 4: Future Outlook and Investment Opportunities - The ongoing model updates and the increasing efficiency of token usage are expected to drive sustained growth in computing power demand, with both cloud and edge computing becoming critical [22][24][36]. - The competitive landscape suggests that companies with robust financial backing, like Google and Meta, will continue to push for model updates, further enhancing computing demand [26][30]. - The domestic AI industry is poised for growth as local firms enhance their capabilities and seek to capture market share in the evolving landscape of AI applications [4][43].

Core Viewpoint - The European equity market is experiencing strong performance due to significant internal policy changes, while the sustainability of the "American exceptionalism" is under scrutiny, prompting investors to seek opportunities outside the U.S. [2][7] Group 1: New Opportunities in Europe - The macro environment has improved, leading to better valuations and earnings in Europe, particularly in sectors that previously lagged, such as banking, utilities, telecommunications, energy, and materials [3][10]. - Policy shifts, especially from Germany, are addressing structural issues and boosting economic growth, with fiscal support directed towards domestic-oriented industries that have underperformed [3][21]. - Global regional allocation is becoming more valuable, with Europe's market size, economic scale, diverse income sources, and institutional stability presenting relative advantages [3][32]. Group 2: Missing Elements in Europe - Despite positive developments, the European equity market still lacks key factors for a robust "European exceptionalism," including limited economic growth potential and structural challenges [4][44]. - The fragmented financial market in Europe hampers equity market performance, and political fragmentation poses challenges to necessary reforms [4][57]. Group 3: Investment Opportunities - The new investment narrative in Europe is shifting towards policy-driven "self-reliance," focusing on military spending, technology independence, energy policies, and enhancing domestic demand [5][59]. - The need for financial market reforms and leveraging Europe's substantial savings base is critical for driving investment [5][60]. Group 4: Policy Changes in Europe - Germany's fiscal plan could reach €1 trillion over the next decade, significantly impacting public spending and economic growth [21][22]. - The EU's "Re-Arm Europe" initiative, totaling €800 billion, aims to bolster fiscal spending, particularly in infrastructure, green transition, and digitalization [21][22]. - Regulatory changes and discussions around EU integration are gaining momentum, which could enhance investment attractiveness despite existing political challenges [26][27]. Group 5: European Market as a Potential Alternative - Regional diversification in investment is becoming increasingly important, with Europe presenting several advantages over other non-U.S. regions, including market size and economic scale [31][32]. - Europe's equity market comprises 12% of the MSCI ACWI index, making it one of the largest equity markets globally [31]. - The EU's stable institutional framework, despite slower decision-making, provides predictability and discipline in fiscal matters [32]. Group 6: Potential Funding Sources - European households currently allocate only 22% of their assets to equities, significantly lower than the U.S. at 41%, indicating potential for increased investment in the equity market [37][38]. - The asset management industry in Europe is well-developed, and recent macro changes could shift the investment landscape towards more favorable allocations in European equities [37][38].

Core Viewpoint - The demand for AI computing power is driving a significant increase in both volume and price in the PCB market, with expectations for the AI PCB market to reach $5.6 billion in 2025 and $10 billion in 2026 [2][8]. Demand Side - AI-driven computing infrastructure and smart device innovations are expected to boost the global PCB market value to $73.57 billion in 2024, representing a year-on-year growth of 5.8% [5][7]. - The demand for AI servers and GPUs/ASICs is projected to provide new momentum for long-term growth in the PCB market, with a forecasted compound annual growth rate (CAGR) of 4.8% from 2025 to 2029, reaching $94.7 billion by 2029 [5][8]. - The penetration rate of AI servers is expected to reach 15% by 2026, with shipments projected to exceed 2.1 million units [7]. Supply Side - PCB manufacturers are accelerating capacity expansion, with a total investment of approximately 32 billion yuan announced by seven listed companies for PCB capacity expansion [2][35]. - Despite the acceleration in capacity expansion, the efficiency of capacity release is expected to lag behind the growth rate of AI demand, leading to a sustained supply-demand gap in the medium term [2][35]. Technological Innovations - Continuous iterations in technology are anticipated, with a focus on reducing dielectric constant (dk) and dielectric loss (df) to overcome transmission bottlenecks [4][52]. - The integration of advanced materials and new processes, such as CoWoP and substrate-like PCBs, is expected to drive further growth in the PCB market [4][52]. Market Dynamics - The global PCB market is heavily concentrated in Asia, with China leading in market share. The Asian PCB market is projected to reach $67.9 billion in 2024, accounting for 93.1% of the global market [35][38]. - The demand for high-layer and HDI PCBs is increasing due to the requirements of AI servers, which typically have more than 20 layers and require ultra-low loss materials [35][42]. CCL Market - The CCL (Copper Clad Laminate) market is also experiencing high demand, with the global market expected to reach $15.08 billion in 2024. Major suppliers include companies like Kingboard and Shengyi Technology [37][40]. - The leading CCL manufacturers are expanding their production capacity to meet the rising demand driven by AI infrastructure [40][41].

Core Viewpoint - The current U.S. economy is entering a "high for longer" era characterized by sustained high tariffs and interest rates, leading to "stagflation-like" pressures that suppress overall demand and economic growth [3][4]. Group 1: Stagnation Factors - The combination of high tariffs and high interest rates is significantly suppressing demand in the U.S. economy. The effective average tariff rate is projected to rise from 17.3% to 20.5%, indicating a long-term institutionalization of tariff policies [6][11]. - Tariffs increase the cost of imported goods, which can either reduce corporate profits or diminish consumer purchasing power, ultimately leading to suppressed total demand [6][7]. - Recent data shows a significant increase in U.S. tariff revenue, reaching $27 billion in June, indicating that the impact of tariffs is becoming more pronounced [7][9]. - High interest rates, maintained by the Federal Reserve due to inflation concerns, are particularly detrimental to interest-sensitive sectors like real estate, which has seen negative growth in investment since Q1 [11][15]. - The U.S. GDP data indicates a slowdown in domestic private sector final sales, with a year-on-year decline of 1.2%, marking the third consecutive quarter of deceleration [15][16]. Group 2: Inflationary Pressures - Despite many companies absorbing tariff costs to maintain market share, the institutionalization of tariffs may lead to increased prices for consumers as companies face squeezed profit margins [29][31]. - The Consumer Price Index (CPI) report for June shows rising prices in certain goods, indicating that tariff costs are beginning to affect retail prices [31][33]. - Predictions suggest that retail automobile prices may rise by 4% to 8% by the end of the year, contributing to upward pressure on core inflation [33][34]. Group 3: AI as a Counterbalancing Factor - The rapid development of artificial intelligence (AI) is driving increased capital expenditure in sectors such as data centers, chip manufacturing, and software development, partially offsetting the negative impacts of high tariffs and interest rates [19][20]. - Since the release of ChatGPT, spending on data center construction has surged, nearing levels of office building expenditures, with a 13.9% year-on-year increase in investments related to AI [19][21]. - However, AI's growth may also lead to structural challenges, such as job displacement for less skilled workers, contributing to a rising unemployment rate among younger demographics [25][27]. Group 4: Monetary Policy Uncertainty - The Federal Reserve faces a policy dilemma with simultaneous economic slowdown and persistent inflation, leading to internal divisions among officials regarding interest rate decisions [36][39]. - Recent statements from various Federal Reserve officials reflect a lack of consensus on whether to lower rates or maintain them, increasing uncertainty in monetary policy and market volatility [36][39].

Core Viewpoint - In July, the "anti-involution" policy led to a narrowing of the PPI month-on-month decline to -0.2%, while the CPI for industrial consumer goods improved, contributing to a third consecutive month of core CPI year-on-year recovery. However, the impact of supply-side capacity management on prices is more moderate compared to 2016, with PPI year-on-year decline remaining at a two-year low of -3.6% and CPI year-on-year turning flat [2][19]. Group 1: CPI Analysis - The CPI year-on-year remained flat at 0.0% in July, primarily dragged down by food items, while core CPI rose to 0.8% [4]. - Food prices decreased by 1.6% year-on-year, with the decline widening by 1.3 percentage points compared to the previous month, contributing a marginal drag of 0.30 percentage points to the overall CPI [8]. - Seasonal supply of fresh vegetables and fruits was abundant, leading to a significant year-on-year decline in their prices, with fresh vegetables down 7.6% and fresh fruits up 2.8% [8][11]. Group 2: PPI Analysis - The PPI month-on-month decline narrowed from -0.4% to -0.2% in July, but the year-on-year decline remained at -3.6%, indicating limited effectiveness of the "anti-involution" measures on price uplift [19]. - Key industries such as coal, steel, and cement have implemented capacity management measures, which have led to a reduction in the month-on-month price declines for these sectors [19]. - International factors continue to pressure export-related prices, while domestic oil and non-ferrous metal prices have seen increases due to external input factors [20]. Group 3: Market Outlook - The "anti-involution" measures have led to a faster increase in futures prices compared to spot prices, indicating market expectations are ahead of actual supply-side adjustments [24]. - Looking ahead, the diminishing drag from tailing factors may lead to improvements in PPI year-on-year in August and CPI year-on-year in the fourth quarter, but sustained inflation recovery will require stronger policy support and a focus on expanding domestic demand [24]. - The current supply-side price uplift is more challenging and softer compared to 2016, with a broader range of industries involved, including upstream raw materials and downstream sectors [24].