Chinese technology powerhouses are beginning to reap early returns from their heavy investments in artificial intelligence, with quarterly results showing the impact across businesses from short video platforms like Kuaishou Technology to social media giants like Tencent Holdings. Kuaishou, China's second-largest short video app and rival to TikTok's Chinese sibling Douyin, was the latest to highlight gains from AI adoption. The company, in an earnings statement on Wednesday, attributed its third-quarter r ...

Core Viewpoint - November presents a favorable opportunity for investors to acquire undervalued stocks, particularly in the AI sector, as tax-loss harvesting may lead to attractive pricing Group 1: Meta Platforms - Meta Platforms' share price declined significantly after its third-quarter results, primarily due to aggressive spending rather than poor performance, which remains strong [2][5] - The company is leveraging AI to enhance ad revenue by providing engaging content to users and improving ad targeting, resulting in a 26% revenue increase last quarter, with ad impressions up 14% and average ad prices rising 10% [3] - Meta has begun serving ads on WhatsApp and Threads, presenting new revenue opportunities, and despite its metaverse investments, it continues to generate strong free cash flow, making it an attractive buy [5] Group 2: Pinterest - Pinterest's stock price fell sharply post-earnings report, but it is now trading at a forward P/E ratio of just 13x, indicating a potential bargain [6] - The company reported a 17% year-over-year revenue growth and a 24% increase in adjusted EBITDA last quarter, showcasing its strong performance [6] - Pinterest is experiencing growth in international user additions and average revenue per user (ARPU), and it has successfully transformed its platform into a shoppable discovery site using AI [8][9] Group 3: GitLab - GitLab's stock has been undervalued despite consistent revenue growth exceeding 25%, attributed to its seat-based subscription model [10][12] - The perception that AI will reduce the need for coders is misleading, as GitLab's AI Duo solution is enhancing productivity among developers [12][13] - GitLab is transitioning to a hybrid seat-plus-usage pricing model, which is expected to drive growth and improve its value proposition, with a price-to-sales multiple below 6.4 based on 2026 estimates [13]

Core Insights - NetEase reported its unaudited financial performance for Q3 2025, showing a positive growth trajectory across various business segments [1][2] Financial Performance - Revenue reached 28.4 billion RMB (approximately 4 billion USD), marking an 8.2% increase compared to the same period in 2024 [2] - Gross profit was 18.2 billion RMB (around 2.6 billion USD), reflecting a 10.3% growth year-over-year [2] - Total operating expenses amounted to 10.2 billion RMB (about 1.4 billion USD), which is an 8.9% increase from 2024 [2] - Net profit attributable to ordinary shareholders was 8.6 billion RMB (1.2 billion USD) [2] - Non-GAAP net profit attributable to ordinary shareholders was 9.5 billion RMB (1.3 billion USD) [2] Business Segment Performance - Revenue from games and related value-added services was 23.3 billion RMB (3.3 billion USD), up 11.8% year-over-year [2] - Youdao's net revenue was 1.6 billion RMB (approximately 228.8 million USD), showing a 3.6% increase compared to 2024 [2] - Net revenue from NetEase Cloud Music was 2 billion RMB (around 275.9 million USD), which represents a decline of 1.8% year-over-year [2] - Revenue from innovative businesses and others was 1.4 billion RMB (approximately 202.1 million USD), down 18.9% compared to the previous year [2] User Engagement - The game "Fantasy Westward Journey" achieved a peak of 3.58 million concurrent players for four consecutive times since Q3 [1]

Core Insights - Alphabet Inc. has been upgraded to "Buy" from "Hold" with a new price target of $320.00, reflecting a positive shift in investor sentiment regarding AI's impact on search [1] - The traffic share to Gemini has doubled year-over-year, indicating growing recognition of Google Cloud's potential and its proprietary AI processors [2] - The target multiple for Google core has been raised to 20X EPS, with a significant increase in growth outlook for Google Cloud, maintaining a target multiple of 25X adjusted EBITDA [3] Company Performance - Analysts believe concerns about AI cannibalization of search have diminished, with Google search results remaining robust due to AI features [1] - The bullish outlook on Alphabet shares is driven by renewed confidence in AI-led growth and valuation upside across its core business and Cloud services [2] Market Dynamics - There are ongoing questions regarding long-term search market dynamics, which primarily influence valuation [3] - The revision of target multiples for Google core constitutes about two-thirds of the overall target revision, highlighting a strategic adjustment in valuation approach [3]

Core Insights - The overall favorable market sentiment in 2025 is expected to drive an increase in valuation multiples for the Chinese internet industry, with small and mid-cap vertical companies continuing to outperform the market [1] - Major Chinese internet companies are actively increasing capital expenditures and investing more in the artificial intelligence (AI) sector, with the launch of the domestic AI model DeepSeek positively influencing investor sentiment [1][2] - The valuation multiples for major internet companies have expanded to approximately 17 times adjusted earnings, making them relatively cheaper compared to the U.S. "Tech Seven" companies, which have valuations around 31 times [1] Investment Trends - A significant trend in the Chinese internet industry is the embrace of AI, with major companies increasing capital expenditures driven by demand [2] - Despite concerns over geopolitical uncertainties affecting chip supply, the focus on GPU efficiency and utilization allows Chinese internet companies to adjust their investment targets more flexibly [2] - Domestic AI chip manufacturers are rapidly improving performance due to ongoing self-research investments from internet companies [2] AI and Cloud Market Dynamics - Chinese cloud vendors are committed to investing in AI, with leading companies maintaining their annual capital expenditure guidance to enhance chip utilization and deployment efficiency [2] - Large language models (LLMs) and AI are expected to become sustainable growth drivers for the cloud market, creating cross-selling opportunities for traditional businesses [2] E-commerce and Retail Trends - Another trend in the Chinese internet industry is the increased investment in instant retail, aiming to boost user engagement through high-frequency delivery transactions [3] - The competition in the instant retail sector is stabilizing, with industry transaction volume growth slowing down, and a return to normalcy is anticipated following the end of major e-commerce promotions [3]

Core Insights - Yann LeCun, Meta's Chief AI Scientist, will leave the company to establish his own AI startup focused on world models, a field he has extensively researched [2][3] - Meta plans to collaborate with LeCun's startup, aiming to leverage its innovative outcomes [3][4] - LeCun's departure is significant for Meta, as he is regarded as a foundational figure in modern AI, having co-founded the Facebook AI Research (FAIR) and received the Turing Award [5] Group 1: Company Developments - Meta's current AI focus has shifted towards large language models (LLMs), including the Llama series, following a series of setbacks earlier this year, such as the delayed release of the Llama 4 model [4][5] - The company has invested billions in recruiting talent and establishing the Meta Superintelligence Lab (MSL), led by notable figures from Scale AI and GitHub [4] Group 2: Research Focus - LeCun's new startup aims to advance research in advanced machine intelligence (AMI), which he believes will have profound impacts across various economic sectors, some of which overlap with Meta's interests [5] - The startup will pursue the development of systems capable of understanding the physical world, possessing persistent memory, reasoning, and planning complex behavior sequences [3][5]

Core Insights - Google has opened its largest artificial intelligence (AI) infrastructure hardware engineering center outside the United States in Taiwan, highlighting the strategic importance of Taiwan in the global tech landscape [1] Group 1: Company Developments - The new AI center in Taiwan is a significant investment by Google, reflecting its commitment to expanding AI capabilities and infrastructure [1] - Taiwan's president emphasized the center's role in enhancing Taiwan's position as a key player in the global technology supply chain [1] Group 2: Industry Implications - The establishment of this AI center is expected to foster collaboration between Google and local tech firms, potentially leading to innovation and growth in the AI sector [1] - This move may also attract further investments in AI and technology infrastructure in Taiwan, reinforcing its status as a tech hub in Asia [1]

Group 1 - The Hang Seng Technology Index experienced a decline of over 1% on November 20, with significant fluctuations in the largest A-share counterpart, the Hang Seng Technology Index ETF (513180), which followed the index's downward trend [1] - The Hang Seng Technology Index reached a recent high of 6715.46 on October 2, but has since undergone a correction of over 15% in less than two months, including a "four consecutive days of decline" in the last four trading days [1] - Concerns regarding the "AI bubble" and the cooling of the Federal Reserve's interest rate cut expectations have contributed to the pullback in the Hong Kong technology sector [1] Group 2 - Multiple institutions remain optimistic about the medium to long-term prospects of the Hong Kong technology and internet sector, with Cathay Pacific Securities believing that the AI wave will be a key theme for 2026 [1] - Shenyin Wanguo pointed out that AI is becoming a significant driving force in the Hong Kong internet industry, leading to accelerated growth in cloud revenue, with AI cloud products showing higher profit margins compared to traditional cloud products [2] - As of November 19, the latest valuation (PETTM) of the Hang Seng Technology Index ETF (513180) was 21.74 times, lower than other major global technology indices, indicating that the index is currently undervalued and presents a compelling investment opportunity [2]

Summary of Key Points from the Conference Call Industry Overview - **Industry**: US Technology, specifically focusing on large-cap tech stocks - **Key Findings**: Mega-cap tech stocks are currently the most under-owned in over 16 years, with a widening gap compared to the S&P 500 Core Insights - **Under-Ownership of Mega-Cap Tech Stocks**: - The gap in institutional ownership for mega-cap tech stocks compared to the S&P 500 increased to -148 basis points (bps) at the end of Q3 2025, up from -140 bps at the end of Q2 2025 [2][12] - Nvidia (NVDA) is identified as the most under-owned large-cap tech stock, followed by Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), and Broadcom (AVGO) [1][2] - **Specific Stock Analysis**: - **Nvidia (NVDA)**: - Institutional ownership decreased by 20 bps quarter-over-quarter (QoQ), ending at -2.61% [9] - **Apple (AAPL)**: - Institutional ownership increased by 36 bps QoQ to 4.45%, while S&P 500 weighting rose by 90 bps, resulting in a widening gap of 53 bps to -2.19% [15] - The iPhone 17 cycle is expected to benefit from a longer replacement cycle and upgrades, with a price target of $305 [15] - **Microsoft (MSFT)**: - Institutional ownership increased by ~40 bps QoQ to 5.1%, but remains ~200 bps below its S&P 500 weighting of 7.1% [16] - The company is positioned well for growth beyond GenAI, with a focus on accelerating revenue growth and margin expansion [16] - **Amazon (AMZN)**: - Remains under-owned with a weighting approximately 144 bps below the S&P 500 [17] - AWS revenue growth is expected to accelerate, with a price target of $315 [17] - **Meta (META)**: - Under-owned with a weighting about 40 bps below the S&P 500, with a price target of $820 [19] - **Alphabet (GOOGL)**: - Under-owned with a price target of $330, driven by GenAI innovation and cloud business growth [17][19] Additional Insights - **Institutional Ownership Trends**: - The average active ownership for large-cap tech stocks is significantly lower than their S&P 500 weightings, indicating potential for future stock performance improvements [12] - The analysis suggests a statistically significant relationship between low active ownership and future stock performance, indicating potential upward price movement for under-owned stocks [12] - **Market Dynamics**: - The report highlights the importance of understanding the dynamics of institutional ownership as it relates to stock performance, particularly in the context of mega-cap tech stocks [12] - **Risks and Considerations**: - Rising commodity input costs may pressure margins for companies like Apple, but manageable due to better supply chain leverage [15] - Concerns regarding the broader return on investment for Nvidia's AI spending, despite strong demand indicators [25] Conclusion - The current landscape for mega-cap tech stocks presents a unique investment opportunity due to their under-ownership status, particularly for stocks like Nvidia, Apple, and Microsoft. The analysis indicates potential for upward price movement as institutional ownership adjusts to reflect their market performance.

Summary of Amazon.com Inc. Conference Call Company Overview - **Company**: Amazon.com Inc (AMZN) - **Market Cap**: $2,443,084 million - **Current Share Price**: $222.55 - **Price Target**: $315.00, implying ~40% upside [6][4] Key Industry Insights - **Industry**: Cloud Computing (AWS) - **Growth Projections**: AWS is expected to achieve mid-20%+ revenue growth in 2026, which is above current estimates of 23% and the Street's estimate of 20% [1][3][4] - **Backlog Analysis**: The AWS backlog has been a significant driver of revenue growth, contributing approximately 35-40% of AWS revenue growth over the past three years [2][3] Core Points and Arguments - **AWS Backlog Model**: The introduction of an updated AWS backlog model indicates multiple paths to achieving mid-20%+ growth in 2026, driven by both backlog and non-backlog workloads [2][3] - **Contract with OpenAI**: A reported $38 billion contract with OpenAI is expected to positively impact the 4Q:25 backlog, contributing to revenue growth [3] - **Revenue Recognition**: Amazon does not disclose the percentage of AWS remaining performance obligations (RPO) expected to be recognized over specific time horizons, unlike competitors [2][10] - **Performance Obligations**: Approximately 25% of AWS RPO is recognized within the subsequent 12 months, and 50% within 24 months [2] Potential Risks - **Revenue Recognition Uncertainty**: The timing and recognition dynamics of RPO could reduce predictability in revenue growth estimates [10] - **Slower Growth Risks**: If the net backlog added in 2026 is lower than expected, or if the pipeline of deals slows down, it could pose risks to growth estimates [10][11] - **Capacity Constraints**: Delays in AWS's plans to double its current capacity by the end of 2027 could negatively impact growth [11] Upside Potential - **Greater Backlog Growth**: If the pace of AWS backlog deals signed exceeds expectations, it could drive upside to revenue growth estimates [12] - **On-Demand Business Growth**: Faster than expected growth in the on-demand business could also enhance overall revenue growth [12] Investment Thesis - **Valuation**: AMZN is currently trading at a ~50% discount to peers on a PEG basis, with faster AWS revenue growth seen as a key driver for multiple expansion [4][14] - **High-Margin Businesses**: Amazon's high-margin businesses are expected to drive greater profitability while continuing to invest in growth areas [20] - **Recurring Revenue**: Growth in Amazon Prime membership is anticipated to drive recurring revenue and a positive mix shift [20] Conclusion - **Recommendation**: The stock is rated as Overweight, with a price target of $315, indicating a strong potential for growth based on AWS performance and overall company strategy [6][4]