Investment Rating - The report maintains an Equal Weight (EW) rating on Chinese equities within the Emerging Markets (EM) and Asia Pacific ex-Japan (APxJ) framework, reflecting a balanced outlook amid structural improvements and macro challenges [3][22][39]. Core Insights - The report highlights a structural improvement in the Chinese equity market, particularly since the second half of 2024, driven by a bottoming-out of Return on Equity (ROE), government support for private sectors, and the emergence of technology leaders in AI, Tech, and Smart Manufacturing [2][11][42]. - Index targets for June 2026 have been raised, with projected upside of 3% to 5% for major indices such as MSCI China, Hang Seng, HSCEI, and CSI300, reflecting improved earnings and valuation forecasts [2][19][30]. Summary by Sections Structural Improvements - The report notes that structural improvements in the Chinese equity space are sustainable, supported by corporate self-help initiatives, shareholder return enhancements, and a favorable government stance towards private sectors [2][11][42]. - The MSCI China's ROE has improved from 9.8% in mid-2023 to 11.9%, with expectations to exceed 12.0% by the end of 2026 [47]. Market Dynamics - Recent partial de-escalation in US-China tariff tensions has alleviated investor concerns, contributing to a more favorable outlook for Chinese equities [12][19]. - The offshore market is preferred over the onshore A-share market due to a stronger CNY and less exposure to macro-deflationary sectors [4][39]. Sector Preferences - The report advises a balanced investment approach, favoring high-quality large-cap internet and tech leaders while underweighting energy and real estate sectors [5][40]. - Key trades for the second half of 2025 include increasing exposure to Hong Kong/ADR versus A-shares and selectively investing in Chinese AI/Tech leaders [41]. Earnings Outlook - Corporate earnings are showing signs of stabilization after a prolonged downward revision cycle, providing a cushion as global growth slows [13][14]. - The report anticipates moderate earnings growth for 2025 and 2026, with nominal GDP growth forecasted at 3.7% and 3.6%, respectively [23][17].

The biggest overhang on Nvidia Corporation's (NASDAQ: NVDA ) near-term performance remains the evolving regulatory deadlock that the U.S. seeks to hold over China. This follows earlier investor angst about AI spending fatigue, which America's largest hyperscalers have dispelled in theAnalyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expres ...

Core Insights - Apple has launched its next-generation infotainment system, CarPlay Ultra, which is now available in new Aston Martin models in the U.S. and Canada, and will also be available for existing vehicles through a software update [1] - The global infotainment industry is projected to grow at a CAGR of 7.2% from 2025 to 2032, reaching $58.18 billion by 2032, with CarPlay being a leading choice among automakers [2] Company Performance - Apple is experiencing sluggish demand for the iPhone, particularly in China, with a year-over-year sales decrease of 2.3% in Q2 of fiscal 2025, although overall iPhone sales increased by 1.9% to $46.84 billion in the same quarter [4] - Apple shares have declined by 16.6% year-to-date, underperforming peers such as Dell Technologies, HP, and Alphabet [5] - The Zacks Consensus Estimate for Apple's fiscal 2025 earnings has decreased by 0.8% to $7.12 per share, indicating a growth of 5.48% from fiscal 2024 [12] Services Growth - Apple's Services revenue grew by 11.6% year-over-year in the fiscal second quarter, with expectations for continued low double-digit growth in the upcoming quarter [10] - The company has surpassed 1 billion paid subscribers across its Services portfolio, more than doubling its subscriber base in four years, driven by the expanding content of Apple TV+, Apple Music, and Apple Arcade [11] Valuation and Market Position - Apple stock is currently considered overvalued, with a forward 12-month P/E ratio of 27.89X compared to the sector's 25.5X and other competitors [14] - The stock is trading below the 200-day moving average, indicating a bearish trend [17] - The company faces challenges from stiff competition in China and higher tariffs, which are expected to increase costs by $900 million, impacting near-term growth prospects [19]

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the **AI infrastructure industry**, particularly focusing on partnerships between the **US** and the **Middle East** that are expected to benefit companies involved in AI infrastructure such as **DELL**, **ANET**, **SMCI**, and **CSCO** [2][10]. Core Insights and Arguments - **Partnership Announcements**: Recent partnerships worth several billion dollars between the US and Middle Eastern countries have been announced, enhancing visibility into the demand for Sovereign AI infrastructure, which had previously been underestimated due to lack of traction [2][10]. - **Investment Opportunities**: The US is set to receive significant investments from Saudi Arabia, including **$600 billion** announced on May 13th, which includes **$20 billion** for data center and energy infrastructure by **DataVolt** and **$80 billion** in technology investments across various companies [5][9]. - **AI Diffusion Rule Changes**: The US Department of Commerce rescinded the AI Diffusion rule, which would have imposed chip export restrictions, indicating a shift in regulatory landscape that could impact AI technology distribution [5][10]. - **NVIDIA's Export Agreement**: The US and UAE have agreed on a deal allowing **NVIDIA** to export **500,000 H100 GPUs** annually to the UAE, with **100,000 GPUs** allocated to **G42** for AI weather forecasting solutions [5][6]. Important Partnerships and Deals - **DataVolt and SMCI**: DataVolt announced a **$20 billion** deal with **Super Micro** to deliver GPU platforms for AI campuses in Saudi Arabia and the US [9][10]. - **Cisco Collaborations**: Cisco has entered into agreements with **G42** and **HUMAIN** to enhance AI infrastructure and explore cybersecurity solutions [9][10]. - **NVIDIA and HUMAIN Partnership**: NVIDIA will collaborate with HUMAIN to build AI factories in Saudi Arabia, deploying significant data center capacity supported by NVIDIA GPUs [9][10]. Market Sentiment and Future Outlook - The recent announcements are expected to improve investor sentiment towards AI infrastructure, especially following a series of negative headlines in the sector [2][10]. - The diversification of customer demand for AI infrastructure beyond US neo-clouds is highlighted, with companies like **SMCI** expanding their customer base [10][14]. - US hyperscalers such as **Google**, **Microsoft**, and **Oracle** are also participating in Middle Eastern investments, indicating a robust future demand for AI servers in the region [10][14]. Potential Risks - There are concerns regarding potential security risks associated with the KSA+UAE/US AI partnership, particularly regarding GPU diversion to China and unauthorized model use. However, these risks are expected to be mitigated by the operational control of US hyperscalers [14][10]. This summary encapsulates the key points discussed in the conference call, providing insights into the current state and future prospects of the AI infrastructure industry, particularly in the context of US-Middle East partnerships.

Apple's competitors in the large-sized foldable device market may not be limited to Huawei. My research indicates that Amazon is also internally developing a similar product, which has not yet officially kicked off. If development progresses as planned, it is projected to enter mass production in late 2026 or 2027. (Apple’s 18.8-inch foldable device is slated for mass production in late 2027 or 2028.) ...

Investment Rating - ASPEED: Overweight (O/W) with revised 2Q revenue guidance [3][4] - SHIFT: Upgraded to Overweight (O/W) with price target raised to Y1,900 [5] - Silicon Motion (SIMO): Gaining market share in client SSDs and mobile controllers [6] Core Insights - ASPEED has revised its 2Q revenue guidance upward to NT$1.9-2 billion from NT$1.7-1.8 billion, driven by robust demand in CSP across China and the US [4] - The company anticipates a slowdown in 2H due to limited visibility in 4Q, projecting a 15% revenue increase for FY25 [4] - SHIFT is making good progress in project assignments for newly hired talent, indicating strong operational momentum [5] - SIMO is breaking into enterprise and automotive sectors, with expectations of continued share gains in mobile controllers and SSDs [6] Detailed Highlights - ASPEED expects to regain market share from Intel's Oak Stream with the AST2700, supported by a shortened launch schedule and enhanced security features [4] - The company is targeting 3-4 million mini-BMC shipments for FY25, with a forecast of 300-400k PFR chips for Tier-2 customers [4] - SHIFT's enterprise controller is set to ramp in 2H25, with confirmed design wins from Tier-1 customers in the US and China [9] - SIMO aims to increase its client SSD market share from 30% to 40% over the next three years, driven by new product roadmaps [9] - The automotive sector is projected to contribute over 10% of revenue for FY26-27, with design wins from major automotive manufacturers [9] - NVDA's Computex keynote highlighted advancements in ASIC integration and the introduction of new products like CuLitho and GB200 [10]

Core Insights - David Tepper's recent selling of Nvidia stock may indicate more than just profit-taking, as competition in the AI GPU market intensifies and concerns about a potential AI bubble arise [9][10][13][14] Group 1: Nvidia's Stock Activity - Tepper's fund reduced its Nvidia shares from 4.42 million to 300,000, selling 380,001 shares in the first quarter of 2025, representing a 56% sequential quarterly reduction [8] - The selling of Nvidia stock aligns with Tepper's strategy of locking in gains on a stock that has significantly appreciated since its initial purchase in early 2023 [9] Group 2: Competitive Landscape - Nvidia faces increasing competition from companies like Advanced Micro Devices (AMD) and Huawei, which are developing next-generation AI GPUs [10] - Major customers of Nvidia are also developing their own AI chips, which could undermine Nvidia's market share and pricing power [11][12] Group 3: Market Concerns - Historical trends suggest that transformative technologies often experience bubble-bursting events, raising concerns about the sustainability of Nvidia's growth in the AI sector [13] - The likelihood of an AI bubble is heightened by many businesses lacking a clear AI strategy, which could adversely affect Nvidia if such a bubble bursts [14] Group 4: Broadcom's Position - Tepper's fund has shifted focus to Broadcom, purchasing 130,000 shares, as it offers a more diversified portfolio compared to Nvidia [16][18] - Broadcom's solutions, such as the Jericho3-AI fabric, aim to enhance the performance of AI data centers, positioning the company favorably in the AI market [17] - Unlike Nvidia, Broadcom has seen its gross margin consistently increase, indicating stronger earnings potential [21]

Core Viewpoint - Tencent has a strong inventory of chips to navigate through US chip sale restrictions and is focusing on executing its AI strategy despite the dynamic situation [1][2]. Group 1: Chip Inventory and Strategy - Tencent's president, Martin Lau, stated that the company has a "pretty strong stockpile of chips" acquired previously to manage US chip restrictions [1]. - The chips will be utilized in projects that can generate immediate returns, particularly in Tencent's advertising business [1]. - Lau emphasized that the company is exploring the right solutions to ensure its AI strategy remains executable [1]. Group 2: Training Large Language Models - Lau mentioned that Tencent will not require a large number of chips to enhance the performance of its large language models, as companies are moving away from the traditional scaling law [2]. - The company can achieve good training results with smaller clusters, indicating potential in post-training processes that do not necessitate large clusters [3]. - Tencent has enough high-end chips in its existing inventory to continue training models for several more generations [3]. Group 3: Market Context and Competitors - Nvidia announced new export licensing restrictions for chips sold to China, which may impact its inventory and financials, with a potential charge of up to $5.5 billion [4]. - Analysts believe that the new restrictions will not hinder China's AI progress, suggesting that banning the H20 chip would be counterproductive and could benefit Chinese competitors like Huawei [5].

Summary of the Conference Call on China's AI Development Industry Overview - **Industry**: Artificial Intelligence (AI) in China - **Focus**: The development and implications of AI technology in China, including its impact on various sectors and the economy as a whole Key Points and Arguments AI Development Strategy - China is pursuing a top-down approach to align strategy, ecosystem, standards, and industry-specific innovation to unlock AI's potential, supported by a robust infrastructure [1][10] - The country is developing cutting-edge AI capabilities with less hardware, focusing on efficiency rather than just high-performance models [9][11] Economic Implications - AI is expected to boost China's long-term GDP growth by addressing structural challenges such as aging demographics and slowing productivity [20][51] - The AI capex boom is projected to contribute modestly to GDP growth (0.2-0.3 percentage points annually) in the near term [20][51] Investment Opportunities - Morgan Stanley's "China AI 60" identifies leading companies in AI adoption and innovation, highlighting a shift in value from AI hardware to applications [12][48] - Companies with proprietary data are expected to achieve outsized returns, especially those that can build efficient AI services [12][31] Competitive Landscape - The AI landscape in China is becoming more competitive, with companies like DeepSeek prompting others to reduce usage prices and integrate AI into their operations [11][19] - China has the most developers of large language models (LLMs) outside of the US, with a vibrant ecosystem driven by private sector innovation [66][77] Regulatory and Market Challenges - US restrictions on advanced computing resources are a near-term headwind, but Chinese companies are focusing on developing more efficient AI technologies [11][38] - The regulatory approach in China balances fostering innovation while ensuring control, which is crucial for the AI value chain [10][46] Social and Labor Market Impact - The AI revolution may lead to significant labor displacement, necessitating stronger social safety nets and support for AI-oriented education and training [21][59] - AI's impact on labor is expected to be broad and deep, affecting various skill levels and industries [21][57] Future Outlook - By 2030, China aims to achieve global leadership in AI, with a focus on integrating AI into key manufacturing and consumer sectors [46][74] - The AI ecosystem is expected to continue evolving, with significant advancements in applications across various industries [70][77] Additional Important Insights - China's AI strategy is intertwined with its broader economic and industrial strategies, aiming for self-reliance and improvement [71][74] - The country is positioned to influence global tech policies and standards as it advances in AI technology [47][76] - The AI industry in China was valued at over US$3.2 billion as of 2024, with a strong emphasis on efficiency and application [77][78] This summary encapsulates the critical insights from the conference call regarding China's AI development, its implications for the economy, investment opportunities, and the competitive landscape.

M BluePaper May 13, 2025 09:00 PM GMT Global Technology China – AI: The Sleeping Giant Awakens China is focused on how AI can drive industrial transformation at scale and turn constraints into opportunities. A top-down approach, aligning strategy, ecosystem, standards and industry-specific innovation to an already robust infrastructure, is helping unlock AI's potential in China. Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be a ...