Summary of Key Points from the Conference Call Industry Overview - **Industry**: Global Technology, specifically focusing on AI Supply Chain and semiconductor industry - **Key Players**: TSMC, Nvidia, Broadcom, AMD, MediaTek, Alchip, Aspeed, Advantest, KYEC, and others Core Insights and Arguments 1. **Cloud Capex Growth**: Morgan Stanley expects 2026 cloud capex to increase by 31% year-over-year (Y/Y) to US$582 billion, significantly higher than the consensus estimate of 16% Y/Y growth [2][10][67] 2. **AI Server Capex**: The implied AI server capex is projected to grow approximately 70% Y/Y in 2026, driven by an increase in AI server capex mix [2][11] 3. **TSMC CoWoS Capacity**: TSMC's 2026 CoWoS capacity is estimated to remain unchanged at 93k wafers per month, which is expected to support the anticipated AI capex growth [1][4][27] 4. **Hyperscalers' Capex**: The top 11 global hyperscalers are tracking a cash capex of US$445 billion for 2025, reflecting a 56% Y/Y growth, with major contributions from Microsoft, Amazon, and Alphabet [9][68] 5. **AI Chip Demand**: Strong demand for AI semiconductors is expected to persist, with Morgan Stanley maintaining an "Overweight" rating on key semiconductor companies [2][11] Additional Important Insights 1. **China's AI Chip Supply**: There are ongoing developments in China's AI chip supply, with Nvidia placing new wafer orders at TSMC for H20 chips, adding 200k units to the previous production of 1 million units [8] 2. **Nvidia's CoWoS Consumption**: Nvidia's CoWoS consumption assumption has been raised from 580k to 595k units for 2026, indicating strong demand for their chips [22] 3. **Market Dynamics**: The report highlights the competitive landscape, noting that Huawei is developing its own AI chips to compete with Nvidia, showcasing the CM384 server rack prototype [8][41] 4. **Depreciation Trends**: Depreciation as a percentage of total expenses for data center customers is expected to rise, reflecting increased investments in data centers [60] 5. **AI Inference Demand**: Monthly tokens processed by major cloud service providers indicate a growing demand for AI inference, with Google processing over 980 trillion tokens in July 2025, doubling from May [15] Conclusion The conference call emphasizes a robust outlook for the AI semiconductor industry, driven by significant increases in cloud capex and AI server investments. TSMC's capacity plans and the competitive dynamics in the AI chip market, particularly with developments in China, are critical factors to monitor.

Investment Rating - The report does not explicitly provide an investment rating for Time Interconnect (1729.HK) Core Insights - Time Interconnect is expected to experience revenue growth in 2025 driven by rising AI demand, production site diversification, and exposure to various end markets [1][8] - The company reported revenues of HK$7.4 billion in 2024, with a gross margin of 14.6% [3] - The revenue from server ODM business reached HK$3.2 billion in 2024, accounting for 43% of total revenue [7] Summary by Sections Industry Overview - Time Interconnect specializes in customized copper and optical fiber cables, as well as servers ODM, with production sites in mainland China, Japan, and Mexico [3] - Key applications include telecommunications, data centers, industrial equipment, medical equipment, and automotive wiring harnesses [3] Growth Drivers - AI demand is driving the adoption of high-speed cables, with a reported 208% year-over-year growth in high-speed cable revenues in 2024 [4] - 42% of cable assembly revenues were derived from data center clients in 2024, indicating strong demand from this sector [4] Business Outlook - Management is optimistic about revenue growth in 2025, supported by the expansion of the Mexican production site and increasing capex spending from Chinese CSP clients [8] - The planned acquisition of Leoni AG is expected to diversify the business into automotive cables and wiring harnesses [8]

Investment Rating - The report maintains an "Overweight" (OW) rating for the covered companies, indicating an expectation of outperforming the average total return of the stocks in the research analyst's coverage universe [29][31][33]. Core Insights - The report highlights robust capital expenditure (capex) growth among major US Cloud Service Providers (CSPs) such as Meta, Microsoft, and Google, with a combined year-over-year growth of 60% [1]. - The positive outlook for capex investments is supported by raised full-year guidance from Meta and reiterated forecasts from Microsoft and Google, suggesting continued strong investment momentum throughout the year [1][3]. - Despite concerns regarding a slowdown in AI investments and tariff impacts, the report suggests limited near-term effects on capex trajectories for the CSPs [1]. Summary by Company Meta - Meta's capex increased by $7 billion year-over-year for the second consecutive quarter, with a 104% rise year-over-year in Q1 2025, reaching $13.7 billion [3]. - The full-year capex outlook for 2025 has been raised to $64-$72 billion, reflecting a year-over-year growth of 73%, driven by AI investments and core business support [3]. Microsoft - Microsoft reported a capex of $21.4 billion for Q3 2025, marking a 53% increase year-over-year, despite a 5% quarter-over-quarter decline [3]. - The company maintains a double-digit growth outlook for fiscal 2H25, with expected year-over-year growth of over 10% for Q4 2025 [3]. Google - Google's capex for Q1 2025 rose by 20% quarter-over-quarter and 43% year-over-year, totaling $17.2 billion, primarily due to infrastructure investments [3]. - The full-year capex outlook for 2025 is reiterated at $75 billion, indicating a year-over-year growth of over 40% [3].

Summary of Conference Call Notes Industry Overview - The conference call focuses on the **technology sector** in China, specifically regarding **China Telecom (CT)** and its server tender results. Key Points and Arguments Server Tender Results - CT's server tender results indicate a **28% year-over-year growth** to **Rmb17 billion** [1] - The **localization rate** for CPUs in the tender increased from approximately **37% to 68%** [1] - CT has guided for a **22% growth** in computing capital expenditures (capex) for 2025 [1][2] Market Share Dynamics - Significant shifts in market share were observed, with **Lenovo, Power Leader, and ZTE** gaining the most, while **H3C, xFusion, and Inspur** saw substantial declines [4] - Inspur's decline is attributed to its recent inclusion in the **US Entity List**, which may further impact its market share [4] - xFusion is also considered vulnerable due to its ties with US sanctions [4] Localization Trends - The localization rate for the 2024-25 server tender reached **67.5%**, with **49%** of that attributed to **Huawei's Kupeng** [3] - The demand for locally developed cloud and AI technology is expected to drive further increases in localization rates among state-owned enterprises and government entities [3] Future Projections - CT's upcoming server tender for 2024-25 will involve **156,000 servers** [3] - The **cloud capex** for both CT and China Unicom (CU) is projected to grow over **20% year-over-year**, while China Mobile's (CM) capex is expected to remain flat [2] - Accelerating AI development in China may necessitate an upward revision of CM's cloud capex guidance in the second half of 2025 [2] Financial Performance and Risks - ZTE reported over **40% growth** in server revenue in the second half of 2024, but faces challenges due to lower margins (3-5%) compared to telecom equipment (40%+) [4] - The potential for an earnings miss at ZTE is highlighted, maintaining a rating of **Underperform (UNPF)** [4] Competitive Landscape - The top winners of CT's 2024-2025 server tender include: - **1. xFusion**: 17.9% - **2. Huakun Zhenyu**: 13.6% - **3. Power Leader**: 12.8% - **4. ZTE**: 10.3% - **5. Fiberhome**: 9.3% - **6. Inspur**: 7.2% - **7. H3C**: 7.0% [5] Historical Comparison - Comparison with the previous year's tender shows a decline in market share for xFusion, Inspur, and H3C, which were the top three players in 2023 [5] Additional Important Insights - The localization rate has nearly doubled from the previous tender, indicating a significant shift towards domestic suppliers [3][9] - The competitive pricing strategies of companies like Lenovo, which offered prices **13% below** the average of other winners, are influencing market dynamics [4] This summary encapsulates the critical insights from the conference call, highlighting the evolving landscape of the technology sector in China, particularly in relation to server tenders and market share shifts.

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