Investment Rating - The report upgrades Aspeed Technology from Equal-weight to Overweight with a price target of NT$5,000 and raises Montage Technology's price target to Rmb100 from Rmb88 [6][35]. Core Insights - The report indicates a shift in perspective on cloud semiconductors, moving from a neutral stance to a positive outlook as a potential trough in cloud capital expenditures (capex) is anticipated in 4Q/1Q26, with US tariff impacts already priced in [2][33]. - Strong growth in US cloud capex is projected, with a year-over-year increase of 38% in 2025, marking it as the third strongest year of capex growth in the past decade [10][12]. - The report highlights that the market may be underestimating the upside risks associated with CPU and non-standard AI server demand, particularly with the ramp-up of GB racks and increased semi content in servers [9][4]. Summary by Sections Cloud Semiconductor Outlook - The report suggests that the cloud semiconductor cycle is likely to trough soon, with earnings revisions expected to bottom out and improvements in GB rack yield [2][3]. - General server demand has exceeded expectations in the first half of the year, driven by inference demand and alternative GPU solutions, indicating sustained demand into the second half [3][4]. Company-Specific Insights - Aspeed's earnings downgrades are believed to have reached a bottom, prompting an upgrade to Overweight due to anticipated earnings momentum [5][41]. - Montage is expected to benefit from the adoption of advanced interfaces by China server brands, with a projected earnings growth of 25% CAGR from 2024 to 2027 [5][33]. Financial Projections - The report raises earnings estimates for Aspeed by 9% for 2025, 8% for 2026, and 31% for 2027, while Montage's earnings are raised by 9% and 11% for 2026 and 2027, respectively [5][33]. - Montage's valuation appears attractive at 38x the estimated EPS for 2026, especially given the forecasted earnings growth [5][41]. Market Trends - The report notes that the cumulative capex from the top 11 global cloud players is expected to reach US$392 billion in 2025, representing 16.6% of their revenue, which is an all-time high [10][12]. - The anticipated increase in semi content in servers is linked to enhanced security functions, which will likely benefit companies with comprehensive product offerings [4][9].