AI capex cycle, memory stocks, and China internet (with Yvonne Man, April Hong)

Introduces Winnie Wu, head of APAC Equity Strategy at BofA Global Research, noting crowded positioning, high volatility, and elevated valuations in AI plays, with retail amplifying ETF volatility.

Yvonne Man

Winnie Wu

Traditional global long-only investors are less crowded in memory stocks; they haven't capitulated from China internet into memory. Asian investors are more pragmatic, chasing momentum in AI/semiconductor and mid-small cap names.

Many US EM long-only investors are debating whether to cut China internet losses or wait for a turnaround/policy stimulus.

Asks how important earnings are given that hardware valuations have spiked and stock prices have already reflected optimism.

April Hong

Winnie Wu

In Korea/Taiwan, earnings are still being revised upward. The debate is whether long-term agreements for memory stocks lock in profits or are meaningless when the cycle turns. In China A-shares, any earnings miss triggers heavy selling pressure, amplifying volatility.

Previously, some GPU names saw huge downward pressure after earnings misses.

Asks about Chinese internet names and what to do with them.

April Hong

Winnie Wu

Pain in China internet will persist for 3-6 months. Leading platforms must invest in AI, making earnings more negative. Consumer-side AI monetization is unclear. Even though PEs look low, earnings are still being revised down, making it hard to call a bottom. Opportunity cost is high: holding these names for 3 months vs. memory stocks up 50%.

A long-only investor said normally they'd expect 30-50% upside in 12-18 months, but now the opportunity cost of not being in memory is too high.

Asks about Hong Kong stocks overall, cross-border flow tightening, and property sector rebound chances.

April Hong

Winnie Wu

More comfortable with Hong Kong banks, cautious on Hong Kong property for H2. House view forecasts three Fed rate hikes, negative for property. Hong Kong property price index lags HSI. Stock market pressure from liquidity drains (IPO lockups, cross-border tightening) will also pressure property. Prefers Hong Kong banks.

1.2 trillion HKD of IPO lockups coming, plus competition from Asia/US IPOs.

Asks how much conviction investors have to broaden out of the AI trade.

Yvonne Man

Winnie Wu

For nimble/platform hedge funds, momentum is still there until next hyperscaler earnings (2-3 months away). No compelling alternatives; conviction in defense/industrials is not as strong as AI.

Notes that the K-shaped dispersion in China is more pronounced than elsewhere, with AI/ manufacturing favored over consumer demand stimulus.

Yvonne Man

Winnie Wu

Wealth effect from the stock market is far less prevalent in China than in Korea/Taiwan. In Korea, retail shareholders (5 million) drive luxury spending. In China, only a small part of the population (e.g., in Lujiazui) benefits. Rapid rotation of themes makes it hard for retailers to make money.

Asks about the rest of Asia locked out of the AI trade, and whether cyclicals have a chance as geopolitics cool and oil prices ease.

April Hong

Winnie Wu

As long as the AI capex cycle continues, it drives earnings growth and revisions in Korea/Taiwan tech. India underperformed but trades at 21x PE vs. MSCI Korea at 8-9x. Investors still focus on earnings momentum and growth.

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