US MARKET INTELLIGENCE | MORNING BRIEFING

Research evidence excerpt

US MARKET INTELLIGENCE | MORNING BRIEFING

strong performance in China’s AI supply chain and models YTD, we could see further profit-taking in

crowded AI longs. (ii) TACTICALLY LONG ASIA REFINERS – geopolitical uncertainty and refinery

utilization have pushed Asia gross refining margins to a new record high, and the current

supply/demand backdrop should continue to support higher GRMs. While the group has rallied MTD,

it is still 9% below its February high. (iii) HEDGES — We like long LatAm (ILF) as a diversifying play

against a potential pullback in the EM AI theme and for relative resilience against geopolitical risks.

• OLD MONETIZATION MENU (JULY 13) – We continue to favor the barbell of Tech and Cyclicals as

the core part of our trade expression, as well as holding Healthcare as an uncorrelated play. Within

Tech, we think the consensus +Semis vs. -Mag7 or -Software may evolve as bids may return to Mag7

given its cheap valuation. Though it may be the case that investors need to see a change to either

end user adoption rates of AI and / or an acceleration in earnings that allows that companies to

reduce future reliance on credit markets.

• DELTA-ONE THEMATIC IDEAS (PRYANKA THAPA, JULY 17) – Long Infrastructure Software

(JP2INFSF) & Long Security Software (JP2SESF) / Short Application Software (JP2APSF). Although

AI datacenter buildout has re-rated the physical layer (semis, hardware, networking, power),

Infrastructure Software/Security Software remain the underappreciated second-order beneficiaries of

that same capex

o Long Infrastructure Software (JP2INFSF): The software that runs the buildout; observability,

orchestration, and data and networking management

o Long Security Software (JP2SESF): A growing attack surface as AI datacenter footprint scales,