China Equity Strategy "How close are we to the peak of the AI tech upcyc..."

研报英文原文证据摘录

China Equity Strategy "How close are we to the peak of the AI tech upcyc..."

Historically the AI tech share prices in China have the highest correlation with revenue

and earnings growth and contract liabilities (see Figure 2). These metrics appear to

remain supportive; interestingly the correlation of China tech stocks to the US interest

rates is relatively limited. We do note that when revenue growth peaks, this typically

marks a period of consolidation or decline for the related AI tech names in the next 6

months (see Figure 11). That said this level of underperformance does seem acceptable

given the strong earnings momentum. Looking at past tech rallies (i.e. during the 4G,

5G and cloud computing eras), we saw these rallies typically lasting for around 2 years

with the related stocks delivering excess return of 95% and valuation uplift of more than

19 points for the related names. This compares with the 215% excess return and 16x P/E

re-rating that the AI names have delivered since the Deepseek moment in early 2025.

Even if we are moving closer to the peak of the cycle, the potential upside on offer may

remain significant - looking at the previous upcycles, the tech sector have on average

rallied 48% within the last 3 months of reaching the peak.

Bottom line: remain overweight hardware tech but 2027 maybe bumpier

Bottom line, we think the strong revenue and earnings growth over the rest of the year

would continue to support AI tech names. However as capacity expands and growth

slows into next year, it may become more bumpy and we would expect sector leaders

that are making further inroads into the global supply chain to perform better. Our top

picks include: NAURA Tech, Montage, CR Micro and JCET.

China Equity Strategy 23 June 2026 ab 2