BOCOM INTL: Technology stocks diverge, optimistic about the investment prospects in AI infrastructure related to 2026.

BOCOM INTL released a research report stating that the timing of the market's discussion on the AI bubble coincided with the uncertainty of the rate cut by the Federal Reserve, resulting in a pullback of chip design and foundry companies related to AI. It believes that the potential risks of excessive construction of global AI infrastructure are overall manageable and is optimistic about the investment prospects related to AI infrastructure in 2026. BOCOM INTL's main points are as follows: Different market technology stocks have diverged, with A-shares showing strong performance In the past month, global technology indices have shown divergent performance. From November 11th to December 10th, the MSCI Information Technology Index rose by 0.5%, slightly outperforming the MSCI Global Index (+0.3%). The A-share Wind Information Technology Index rose against the trend by 2.8%, becoming the only sector to achieve positive returns during the same period, while the Shanghai and Shenzhen 300 indexes recorded a decline of 1.3% during the same period. The market response to the listing of Moore Thread has been positive. The Hong Kong stock market may be affected by external fluctuations, with the Hang Seng Index falling by 4.3%; the Hang Seng Tech Index fell by 5.8%, second only to the Hang Seng Media Index, which consists of large internet companies. Valuations of US technology stocks have rebounded slightly after a general decline in late November, with the bank believing that this volatility may be mainly due to the uncertainty of the Fed's rate cut expectations and the market's discussion on the AI bubble. The P/E ratios of the Shenwan Electronics and Shenwan Semiconductor indexes in A-shares have also rebounded. Memory prices continue to soar, with the trend of supply shortage likely to continue until the end of 2026 According to DRAMexchange, the spot average price of DDR5 (16Gb) has risen from $7.676 at the end of September to $27.167 at the end of November; the contract average prices of DDR4 (8Gb) and NAND (128Gb MLC) also continued to rise by 11% and 15% in October. The extent and duration of the current memory price increase exceeds the bank's expectations. The bank believes that the tight supply situation of HBM memory chips may ease in 2026, but overall memory prices are likely to remain strong throughout 2026. Imports of semiconductor manufacturing equipment maintained high-speed growth year-on-year in October According to data from the General Administration of Customs, China's imports of semiconductor manufacturing equipment were $3.86 billion in October, a year-on-year increase of 26%, achieving a significant year-on-year growth for the fifth consecutive month. The bank maintains its previous prediction, expecting the mainland China semiconductor equipment market to reach a market size of $52 billion by 2025 (a 5% year-on-year growth). Considering that the semiconductor industry in China is still in the construction phase, the bank continues to be optimistic about the investment prospects of mainland China's semiconductor equipment and maintains its forecast of a 4.2% increase in market size in 2026 to $54.2 billion compared to 2025. TSMC's revenue in November increased by 24% year-on-year TSMC's revenue for November 2025 was NT$343.6 billion, a year-on-year increase of 24% and a month-on-month decrease of 6%. The bank believes that the shortage of advanced process/advanced packaging capacity may continue to be in short supply in 2026. The 2nm process may be launched in 4Q25, and the 1.6nm process product may be launched in 2H26. The bank is optimistic about the company's technological advantages in advanced processes/packaging. It maintains its previous view that compared to previous cycles, TSMC's bargaining power relative to downstream customers may be improving. The launch of the 2nm and 1.6nm process nodes does not necessarily mean that 3/5nm products will be cheaper. Investment recommendation: NVIDIA's recent stock performance has lagged behind compared to comparable companies, and its dominant position in AI computing has not changed. It maintains a buy rating and a target price of $245. It believes that the U.S. easing export restrictions on H200 to China may marginally improve investors' expectations of NVIDIA's chip market TAM. In addition, the bank believes that the process of China's domestically produced AI chips is continuing to advance. It is optimistic about the opportunities in the domestic semiconductor substitution industry chain, and specifically recommends NAURA Technology Group (002371.SZ) and OmniVision Integrated Circuits Group, Inc. (603501.SH).