Because the U.S. and China settle into an uneasy one-year truce, the takeaway for traders is that every nation will double-down on homegrown expertise, analysts mentioned. “Personal high quality exporters and R & D-rich tech shares aligned with localization, and use state of affairs odds — not headlines — to evaluate threat,” Morgan Stanley strategists really useful in a report this month on how one can navigate the brand new “export management regime.” “The strategic rivalry stays unresolved, with expertise, vital provide chains and capital markets on the coronary heart of ongoing tensions,” the report mentioned. Whereas Washington has restricted Chinese language entry to superior expertise and inspired synthetic intelligence-related funding within the U.S., China is ramping up its personal spending and useful resource allocation to superior expertise in its upcoming five-year plan. Semi computing energy Core to the AI race is computing energy, particularly in semiconductors. Morgan Stanley’s prime decide is SMIC, China’s home chip large. The analysts price the Hong Kong-listed shares obese, and have an 80 Hong Kong greenback ($10.28) worth goal. That is greater than 16% above the place the inventory closed Friday. “Given U.S. export controls and increasing capability, we anticipate SMIC to obtain extra orders for superior node manufacturing,” the analysts mentioned. “We additionally consider SMIC’s superior node capability growth will assist the AI semi growth in China.” One other rising concern is whether or not corporations could have sufficient power to energy AI. Goldman Sachs analysts this month predicted that by 2030, China could have spare energy capability greater than thrice what the world will probably want then to energy information facilities. For the yr forward, HSBC late final week known as power self-sufficiency one of many new themes that can drive regional shares. “We consider the Asia fairness story in 2026 will probably be led by a pivot away from crowded AI trades,” its analysts mentioned. The financial institution’s main decide was Hong Kong-listed small cap Harbin Electrical, which had greater than 60% upside to HSBC’s 22 HKD goal worth, primarily based on Friday’s shut. “Harbin Electrical instructions round one-third to half of the home market share in energy tools for coal, nuclear and hydro energy tools, with these sectors contributing practically 70% to its income (in 2024),” the HSBC analysts mentioned. “Harbin is an asset-light enterprise mannequin and receives prepayments from prospects.” Robotic {hardware} When it comes to AI commercialization, corporations in China are vying with their U.S. friends not just for software program advances however {hardware} functions, notably in humanoid robots. Goldman Sachs analysts visited 9 humanoid robotic provide chain corporations earlier this month and located that the majority are “actively planning capability in each China and abroad (primarily in Thailand, and fewer in Mexico)” to assist attainable mass manufacturing — to the tune of 100,000 to 1 million models a yr. Whereas that could be overly optimistic in comparison with Goldman’s projections of 1.38 million annual humanoid shipments by 2035, the analysts mentioned suppliers are transferring aggressively and have talked about their prospects embody well-known humanoid gamers Tesla Optimus, Agibot and Xpeng. Goldman’s solely buy-rated Hong Kong play is Sanhua, which administration says is taking a extra conservative strategy by ramping up manufacturing primarily based on precise buyer orders. Sanhua has additionally reserved capability in Thailand for humanoid robotic components manufacturing. Regardless of the thrill about longer-term tech innovation, markets within the close to time period will nonetheless be targeted on the newest U.S.-China commerce talks. The 2 sides have but to succeed in a agency deal on uncommon earths exports, though U.S. Treasury Secretary Scott Bessent has indicated one might occur by Thanksgiving. All because of this Chinese language shares are more likely to stay extremely unstable. “We contemplate this truce fragile, given persistent U.S.-China aggressive confrontation on a number of fronts,” the Morgan Stanley analysts mentioned, “which implies rolling negotiations, truces and periodic flare-ups will probably be the brand new norm for the foreseeable future.” Morgan Stanley mentioned that the MSCI China index tends to see short-term corrections following intervals of U.S.-China stress. However they discovered that “expertise {hardware} and semiconductor names usually rebound inside a month after their preliminary sharp declines.” —CNBC’s Michael Bloom contributed to this report.
