Investment Rating - The industry view is rated as Attractive [2] Core Insights - Internet names were flat last week, with notable performances: AMZN increased by 1% due to Prime Day, while GOOGL and META remained flat [2][10] - The report highlights the upcoming 2Q EPS, indicating a cautious market sentiment [2] - AMZN, GOOGL, and META are trading at 29X, 18X, and 26X their 2026 EPS estimates, reflecting changes of -6%, -2%, and +16% compared to the trailing twelve months average [2] Summary by Sections Market Performance - The overall market performance for the Internet sector was flat, with SPX and NDX showing no significant movement [10] - Specific companies showed varied performance: U increased by 11%, while LYFT and CHWY decreased by 8% each [2] Valuation Metrics - The report provides valuation metrics for major companies, with AMZN, GOOGL, and META trading at 3.4X, 5.4X, and 9.7X EV/Revenue for 2025 estimates [4] - The NTM EV/EBITDA for AMZN, GOOGL, and META is 13.8X, 11.5X, and 14.7X, respectively, compared to their historical averages [8] Company-Specific Insights - AMZN's market cap is $2,428,641 million, with a 1-week performance of +0.7% [5] - GOOGL's market cap stands at $2,214,715 million, with a slight increase of 0.4% [5] - META's market cap is $1,858,351 million, showing a minor decline of -0.2% [5] Sector Analysis - The digital ads sector saw a market-cap weighted average performance of 0.0%, while e-commerce had a 0.7% increase [5] - The travel sector's market-cap weighted average performance was 0.1%, indicating stability [5]

Investment Rating - The report assigns an "Overweight" rating to Pop Mart International Group with a price target of HK$365.00, indicating a potential upside of 39% from the current price of HK$263.20 [6]. Core Insights - Pop Mart's 1H25 sales and earnings exceeded estimates by 8% and 20%, respectively, with Greater China and APAC identified as key markets driving this performance [1][2]. - The company is expected to continue strong sales growth, with estimates of 150-160% growth in 3Q25, following a 230% increase in 2Q25 [3]. - The report highlights significant operational efficiencies, with a notable decline in the SG&A ratio due to economies of scale and effective spending management [2][4]. Financial Performance - For 1H25, Pop Mart reported sales of RMB 13.7 billion, a 200% increase year-over-year, and a net profit of RMB 4,375 million, reflecting a 375% increase [2]. - The gross profit margin (GPM) improved to 70.9%, up 6.8 percentage points, while the operating profit margin (OPM) reached 41.1%, an increase of 16.7 percentage points [2]. - The report forecasts revenue growth of 140% and 210% for 2025, with adjusted net profit margins projected at 31.6%, 32.5%, and 32.9% for 2025, 2026, and 2027, respectively [4][11]. Estimate Revisions - Revenue forecasts for 2025, 2026, and 2027 have been increased by 19%, 22%, and 23%, respectively, due to stronger-than-expected performance in both domestic and international markets [9]. - Gross profit margin assumptions have been raised by 2.6 percentage points for 2025, reflecting increased pricing strategies in the US market [10]. - The SG&A ratio is expected to decrease to 29.9%, 29.3%, and 29.2% for 2025, 2026, and 2027, respectively, indicating improved operational leverage [11]. Valuation - The base case scenario for the price target has been raised to HK$365, reflecting a revised EPS forecast for 2025, with a target P/E ratio of 46x [24]. - The bull case scenario suggests a price target of HK$482, driven by stronger domestic and overseas momentum [25]. - The bear case scenario indicates a price target of HK$161, contingent on unfavorable macroeconomic conditions [25].

Investment Rating - The report raises the full-year 2025 GDP growth forecast to 4.8% from a previous estimate, indicating a positive outlook despite anticipated slower growth in the second half of the year [1][3]. Core Insights - The report highlights a stronger-than-expected real GDP growth of 5.2% year-on-year in the second quarter, driven by fiscal measures and local government bond issuance [2][3]. - However, a slowdown in growth is expected in the second half of 2025, with projections of 4.5% in the third quarter and 4.2% in the fourth quarter due to weaker exports, fading fiscal impulse, and ongoing deflation [3][11][12]. Summary by Sections Economic Growth - The report notes that the net impact of fiscal rollout has been more positive compared to export front-loading, with 85% of Rmb2 trillion in bonds issued in the first half of the year to alleviate local government liquidity stress [2][3]. - The anticipated slowdown in export growth is expected to drag GDP growth by 60-70 basis points in the second half, with a significant impact from earlier export front-loading [3][4]. Fiscal Policy - The fading fiscal impulse is highlighted, as the front-loaded nature of government bond issuance in the first half means less fiscal support in the second half, especially compared to a high base from the previous year [11][12]. - An additional fiscal package is expected in the fall, estimated at Rmb0.5-1 trillion, but this is considered relatively small given the current economic context [11][12]. Deflationary Pressures - The report emphasizes the persistence of deflation, with nominal GDP growth falling to 3.9% year-on-year in the second quarter, indicating weaker corporate earnings and potential impacts on household consumption [12][13]. - The GDP deflator is projected to remain subdued, with expectations of -0.9% year-on-year in the second half of 2025 and -0.7% in 2026, reflecting ongoing deflationary pressures [13].

Investment Rating - The report expresses a bullish outlook on the non-linear rate of AI capability improvement, particularly highlighting the exponential growth in AI performance metrics over the past six years [3]. Core Insights - The total cumulative spend on AI infrastructure is projected to exceed $3 trillion through 2028, with approximately $2.6 trillion allocated for data centers, including chips and servers [5][11]. - Generative AI (GenAI) is expected to create a revenue opportunity of around $1 trillion by 2028, with software spending projected to rise from $16 billion in 2024 to $401 billion by 2028, representing about 22% of total software spending [12][14]. - Consumer spending on GenAI is anticipated to grow from $29 billion in 2024 to $683 billion by 2028, driven primarily by eCommerce, search, and autonomous technologies [14]. Summary by Sections AI Infrastructure and Power Demand - The report indicates that over 110 gigawatts (GW) of power will be needed through 2028, with associated costs for power plants estimated between $210 billion and $330 billion [11]. - A survey by Schneider Electric highlights that grid constraints are the primary barrier to new data center projects, with nearly half of respondents reporting average new data centers of 100+ MW [20]. Data Center Development - Cushman & Wakefield is tracking 47 GW of US data centers in development, with a projected demand of 62 GW through 2028, indicating a significant focus on training-focused data centers [24]. - The report discusses various "de-bottlenecking" solutions for data centers, including building power plants on-site and redirecting power from Bitcoin sites, although these options face execution risks [25][26]. Economic Metrics and Valuation - The report outlines the potential for high returns in building and leasing "powered shells" to hyperscalers, with indicative enterprise value/EBITDA multiples ranging from 10.0x to 15.0x [30]. - Bitcoin stocks are noted to trade at low enterprise value/watt levels, suggesting potential for conversion transactions to high-performance computing (HPC) data centers [27]. AI Adoption and Innovation - The report emphasizes that the level of AI adoption is under-appreciated, with significant investments expected in training AI models due to the high value of improved cognitive capabilities [31]. - The cost per unit of computational power is projected to drop by approximately 90% over a six-year period, indicating rapid innovation and depreciation risk in the GPU replacement cycle [32].

Investment Rating - The report maintains a neutral outlook on the oil market, suggesting that while a surplus is expected, prices are unlikely to fall below $60 per barrel [5][63]. Core Insights - The oil market is projected to return to a sizeable surplus after summer, with a surplus of 1.3-1.6 million barrels per day anticipated from Q4 2025 [3][22]. - Global oil inventories increased by approximately 235 million barrels from January to June 2025, but most of this build occurred outside key pricing centers, which has kept Brent prices relatively stable [11][13]. - Non-OECD countries, particularly China, have significantly increased their oil reserves, which may indicate a shift in oil's role as a store of value compared to gold [2][49]. Summary by Sections Supply and Demand Dynamics - The oil market is expected to experience a surplus of 1.5 million barrels per day in Q4 2025, increasing to over 2 million barrels per day in the first half of 2026 [22][38]. - Non-OECD production is growing robustly, with estimates of non-OECD total oil liquids supply reaching 1.2 million barrels per day, outpacing global demand growth [25][26]. Price Forecasts - Brent price forecasts remain unchanged, with expectations of $67.5 in Q3 2025 and $60 in subsequent quarters [7]. - The report suggests that the Brent curve will need to shift into a contango structure to support storage economics, which could provide price support around $60 per barrel [5][63]. Inventory Trends - Commercial OECD stocks are expected to build by no more than 165 million barrels over the next 12 months, returning to levels seen in 2017 [4][51]. - The geographical distribution of inventory builds has been uneven, with significant increases in non-OECD countries and oil on the water, which do not correlate strongly with spot prices [18][19]. Market Structure - The current structure of the Brent futures curve indicates market tightness, despite the overall surplus, as inventories in key pricing centers remain low [12][17]. - The report highlights that the forward curve's structure will be crucial in determining how much of the surplus will be absorbed by inventories [63].

Investment Rating - The report indicates a modest overall fiscal impulse from the One Big Beautiful Bill Act (OBBBA), suggesting a cautious investment outlook for the affected sectors [5][6][27]. Core Insights - The OBBBA is expected to provide significant cash flow benefits primarily through upfront R&D expensing and bonus depreciation, particularly benefiting sectors like technology, communication services, and healthcare [5][10][12]. - The fiscal impulse from the OBBBA is projected to add approximately 0.4 percentage points to real GDP in 2026, although this is not sufficient to offset drags from trade and immigration policies [27][45][57]. - The report identifies potential beneficiaries among companies with substantial R&D and capital expenditures, focusing on those with significant pre-tax earnings and meaningful cash taxes [5][24][25]. Summary by Sections Fiscal Implications - The OBBBA implies higher incremental deficits than previously anticipated, with a projected 2026 deficit of 7.1% of GDP, influenced by increased tariff revenues [6][12][59]. - The bill's provisions are expected to lead to front-loaded deficits and back-loaded surpluses, indicating a short-term fiscal impulse that may later turn into a fiscal drag [5][38][57]. Sectoral Impacts - Clean Tech: The final bill is viewed positively for most subsectors, alleviating investor concerns regarding the repeal of IRA tax credits [7]. - Consumer: Smaller cuts to SNAP in the final bill reduce headwinds for packaged foods, beverages, retail, and restaurants [7]. - Software: The reinstatement of upfront R&D expensing is likely to provide a cash flow tailwind for large-cap corporates [7][10]. Tax Provisions - Upfront R&D expensing allows companies to accelerate cash tax savings, particularly benefiting sectors like tech and healthcare [10][12]. - The reinstatement of 100% first-year bonus depreciation for qualified property and equipment is expected to positively impact capital-intensive sectors such as aerospace and defense, telecom, and energy [10][12]. Cash Flow and Earnings - The report emphasizes that the majority of OBBBA policies will impact cash flows rather than reported earnings, with significant cash tax savings anticipated in the near term [8][10][12]. - The cash tax rate is expected to potentially reach new lows due to the reinstated and expanded expensing provisions [9][12]. Deficit and Rates - The report notes that concerns regarding fiscal policy under the new administration have somewhat diminished, with the 10-year yield remaining below 4.50% [14][57]. - The OBBBA is projected to result in a lower fiscal deficit in 2025 compared to prior forecasts, while maintaining a broadly unchanged deficit forecast for 2026 [59][60].

Investment Rating - The industry investment rating is "Attractive" [6]. Core Insights - The resumption of H20 chip sales to China is viewed as a positive catalyst for BAT (Baidu, Alibaba, Tencent) as it is expected to accelerate hyperscalers' capital expenditures in the second half of the year, driven by cloud growth [3][6]. - Tencent is highlighted as the top pick in the industry due to its strong revenue and earnings growth, particularly in AI applications and adtech upgrades [4][5]. - Alibaba is recognized as the best AI enabler, with expectations of cloud revenue growth accelerating to 22% in Q2 compared to 18% in Q1 [5]. Summary by Sections Industry Overview - The report indicates that China's AI adoption is increasing, evidenced by an 18% growth in Alicloud in Q1, with expectations for further acceleration in the coming quarters [3]. Company Specifics - Tencent has announced a capital expenditure of approximately Rmb95 billion for fiscal year 2025, while Alibaba plans to invest Rmb380 billion over the next three years [3]. - The report emphasizes Tencent's early monetization through AI adtech upgrades, which have shown consistent double-digit growth in advertising revenue [4]. - Alibaba's current share price does not reflect the value of its cloud business, which is expected to be a significant growth driver [5]. Stock Preferences - Tencent is preferred due to its robust growth in consumer-facing AI applications and limited competition risks [4]. - Alibaba is positioned well to capture rising AI demand through its cloud services, despite recent market focus shifting towards food delivery and quick commerce [5].

Investment Rating - The report assigns an "Attractive" industry view for the semiconductor sector in North America [8]. Core Insights - US AI stocks, including NVIDIA (NVDA), AMD, and AVGO, are expected to receive licenses to ship products to China, which is a significant positive development for 2026 [1][2]. - NVIDIA's management anticipates a recovery in revenue from China, which had previously dropped to below 10% due to export controls, with potential sales rebounding to 11-14% of total sales [4][6]. - The report highlights that NVIDIA's H20 product could represent a $50 billion market opportunity over time, although this figure is more political than a precise forecast [4]. - AMD's exposure to China is believed to be significant, although specific figures were not provided [5]. - The report suggests that the resumption of shipments could lead to an additional $20 billion in revenue for NVIDIA in calendar year 2026, which is above current forecasts [17]. Summary by Sections Section: Market Opportunity - Before export controls, China accounted for approximately 25% of NVIDIA's data center revenue, which fell significantly after the controls were imposed [4]. - The report indicates that the resumption of shipments could help NVIDIA mitigate the risk of China developing its own AI hardware ecosystem [16]. Section: Financial Impact - NVIDIA took a $4.5 billion writedown due to blocked H20 sales, with management indicating that the limitation cost them $8 billion in revenue for the July quarter [6]. - AMD also faced a writedown of $800 million, although the revenue impact was less clearly defined [6]. - The report notes that while the licenses have not yet been granted, the expectation of approval is encouraging, but the timing remains uncertain [10]. Section: Competitive Landscape - The report suggests that AMD may have a higher market share in China compared to NVIDIA, which could lead to increased upside for AMD's AI business [18][19]. - AVGO's exposure to China is relatively small but is part of a larger $60-90 billion market opportunity expected by 2027 [5][20]. Section: Stock Performance and Projections - NVIDIA remains the top pick in the semiconductor sector, with a price target of $170, reflecting a premium valuation due to its growth potential in AI [22]. - The consensus rating distribution shows 89% of analysts rating the stock as "Overweight" [29].

Investment Rating - The investment rating for ASML Holding NV is Equal-weight [4][64]. Core Insights - The Q2 order book for ASML Holding NV was ahead of expectations at €5.5 billion, compared to a consensus of €4.5 billion, with €2.3 billion attributed to EUV [2][6]. - The company has adjusted its full-year 2025 guidance to approximately 15% growth relative to 2024, aligning with a previous midpoint of €32.5 billion [2][6]. - ASML forecasts a 30% growth in the EUV business and a 20% growth in IBM sales, while DUV is expected to remain stable compared to FY24 [2][6]. - The company anticipates that revenue from China will exceed 25% in FY25, consistent with the backlog [2][6]. - Commentary for FY26 indicates preparation for growth, but confirmation is pending due to macroeconomic and geopolitical uncertainties [2][6]. Summary by Sections Financial Performance - The strong order intake of €5.5 billion includes €2.3 billion from EUV, implying around 10 tools sold [6]. - Margins exceeded expectations due to improved IBM sales, although a slowdown in upgrades is anticipated for H2, leading to weaker gross margins [6]. - The guidance for 2025 has been tightened to a mid-point growth of approximately 15% year-over-year compared to 2024 [6]. Market Position - ASML's market capitalization is currently €280.763 billion, with a net debt of €(2.267) billion as of December 2025 [4]. - The price target set for ASML is €660.00, based on a mid-cycle 2-year forward P/E multiple of approximately 25x [4][9]. Industry Outlook - The industry view for European Semiconductors is In-Line, indicating expected performance in line with the broader market benchmark over the next 12-18 months [4][35].

Global Data Center Capacity Growth to Increase 6x Given the surge in AI capex - led by the Big 4 US Hyperscalers - we introduce our Global Data Center Model, which projects worldwide data center capacity growth of +23% pa until 2030. However, our latest AlphaWise survey suggests energy is not the only constraint to building new / bigger data centers. Our new Global DC screen highlights stocks - by geography and sub- sector - exposed to this theme. M Key Takeaways M Global Insight Global Infra, Tech, Utiliti ...