Equity investors seeking exposure to the hot artificial intelligence (AI) theme should look for opportunities in Asia, as US tech companies face stretched valuations, Saxo Markets said.
“Asia offers a cheaper, more earnings-anchored route into the same megatrend,” Charu Chanana, chief investment strategist at Saxo in Singapore, wrote in a note. “Roughly 70 percent of global chipmaking, 90 percent of AI memory, and almost all advanced packaging capacity sit in Taiwan, [South] Korea and Japan — making the region indispensable to the AI ecosystem.”
On the other hand, US tech valuations are elevated, and companies there are facing several risks such as concentration and circularity, she said.
Photo: Bloomberg
The S&P 500 Information Technology Index is trading at almost 30 times its one-year forward earnings, versus a multiple of 17 for the MSCI Asia Pacific Information Technology Index, data compiled by Bloomberg showed.
Saxo’s comments come as investors have been getting increasingly concerned about overheated valuations for some of the biggest AI winners, particularly US-based innovation leaders such as Nvidia Corp. More recently, a wave of circular deals involving OpenAI, Nvidia and other AI-focused firms has sparked additional worries that the boom is being artificially propped up.
While Asian AI-linked firms also share the “global cycle risk,” they offer better earnings visibility as much of the capital expenditure to build AI infrastructure flows into Asian supply chains, Chanana said.
“The physical build-out of AI infrastructure — chips, servers, data centers — continues at full speed, and much of that is happening in Asia,” she added.
Separately, Goldman Sachs Group Inc strategist Peter Oppenheimer, who correctly predicted Wall Street’s underperformance this year, said he expected US equities to keep lagging for the next decade.
Oppenheimer and his team recommended that investors increase diversification beyond the US as elevated stock valuations put a lid on gains.
They said they expect the S&P 500 to achieve annual returns of 6.5 percent in the coming 10 years, the weakest among all regions.
Emerging markets (EM) are projected to be strongest, at 10.9 percent a year, they said.
“Diversify beyond the US, with a tilt toward emerging markets,” Oppenheimer and his team wrote in a note. “We expect higher nominal GDP growth and structural reforms to favor EM, while AI’s long-term benefits should be broad-based rather than confined to US technology.”
The strategists said in the coming years they expect EM gains to be driven by strong earnings growth in China and India.
Asia excluding-Japan is seen as the second-best performer with a 10.3 percent annual return, they said, adding that Japan is set to achieve 8.2 percent, underpinned by earnings growth and policy-led improvements in investor payouts.
Europe is expected to hand investors a 7.1 percent annual return, they said.
PERSISTENT RUMORS: Nvidia’s CEO said the firm is not in talks to sell AI chips to China, but he would welcome a change in US policy barring the activity Nvidia Corp CEO Jensen Huang (黃仁勳) said his company is not in discussions to sell its Blackwell artificial intelligence (AI) chips to Chinese firms, waving off speculation it is trying to engineer a return to the world’s largest semiconductor market. Huang, who arrived in Taiwan yesterday ahead of meetings with longtime partner Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), took the opportunity to clarify recent comments about the US-China AI race. The Nvidia head caused a stir in an interview this week with the Financial Times, in which he was quoted as saying “China will win” the AI race. Huang yesterday said
Nissan Motor Co has agreed to sell its global headquarters in Yokohama for ￥97 billion (US$630 million) to a group sponsored by Taiwanese autoparts maker Minth Group (敏實集團), as the struggling automaker seeks to shore up its financial position. The acquisition is led by a special purchase company managed by KJR Management Ltd, a Japanese real-estate unit of private equity giant KKR & Co, people familiar with the matter said. KJR said it would act as asset manager together with Mizuho Real Estate Management Co. Nissan is undergoing a broad cost-cutting campaign by eliminating jobs and shuttering plants as it grapples
Japanese technology giant Softbank Group Corp said Tuesday it has sold its stake in Nvidia Corp, raising US$5.8 billion to pour into other investments. It also reported its profit nearly tripled in the first half of this fiscal year from a year earlier. Tokyo-based Softbank said it sold the stake in Silicon Vally-based Nvidia last month, a move that reflects its shift in focus to OpenAI, owner of the artificial intelligence (AI) chatbot ChatGPT. Softbank reported its profit in the April-to-September period soared to about 2.5 trillion yen (about US$13 billion). Its sales for the six month period rose 7.7 percent year-on-year
MORE WEIGHT: The national weighting was raised in one index while holding steady in two others, while several companies rose or fell in prominence MSCI Inc, a global index provider, has raised Taiwan’s weighting in one of its major indices and left the country’s weighting unchanged in two other indices after a regular index review. In a statement released on Thursday, MSCI said it has upgraded Taiwan’s weighting in the MSCI All-Country World Index by 0.02 percentage points to 2.25 percent, while maintaining the weighting in the MSCI Emerging Markets Index, the most closely watched by foreign institutional investors, at 20.46 percent. Additionally, the index provider has left Taiwan’s weighting in the MSCI All-Country Asia ex-Japan Index unchanged at 23.15 percent. The latest index adjustments are to
RSS