AI Supply Chain Stocks Are Back In Business!
6 Min. Read Time
Key News
After the Hong Kong market closed, Alibaba announced that it will list its AI chip unit, T-Head, on the Hong Kong Exchange in order to “enhance the value of the T-Head Group through the Proposed Spin-off, which will, in turn, benefit Alibaba and its shareholders”. The IPO may force investors to perform a sum of the parts (SOTP) analysis. Since the valuation multiples of China's semiconductor companies are generally higher than Alibaba’s, whch is a massive understatement, assigning the business a semiconductor multiple could raise the overall valuation of the company. In theory, T-Head could list by the end of November because they filed for the IPO on September 11th and the minimum time from filing to listing is 80 days. However, most IPOs take 110 days from filing. That would push the listing into the first quarter of 2027. I assume we’ll get more details from management during next week’s financial results.
Asian equities had a strong day, following the US market higher, led by Asia’s AI supply chain-heavy markets, including Korea, Taiwan, and Japan, though China’s Science & Technology (STAR) Board only closed higher by +0.64%.
If Nvidia cannot sell chips into China, I would assume the local companies benefit. I found it strange that the STAR Board did not perform better overnight, as October's trade data indicated China that is still the world’s factory, including for many kinds of chips. Exports rose by 35.2% versus September’s 36.3% and expectations of 36.3%, led by high-tech products, which increased 66.6% year-over-year (YoY), an improvement from September’s 63.6% increase. Half of the growth rate was from high-tech products, according to Bloomberg. Imports rose by 41.6% versus September’s 31% and expectations of 33.9%. This increase was led by imports of integrated circuits, up 78% YoY, and crude oil, up 41%.
Hong Kong and Mainland China-listed AI supply chain stocks were mostly higher overnight. Meanwhile, onshore semiconductor stocks had mixed performance. Technology hardware stocks also had a very strong day, as Hong Kong-listed communications equipment makers Innolight and YOFC were up 8.99% and 5.65%, respectively. Although technology hardware stocks were stronger, Hong Kong-listed E-Commerce and internet stocks were lower on expectations that sales during Singles Day, the E-Commerce event larger than Black Friday, will disappoint. Alibaba fell by -2.87%, though Mainland investors were net buyers via Southbound Stock Connect. JD.com fell by -0.18%, Tencent fell by -0.14%, Meituan gained 0.47%, Baidu gained 1.53%, and NetEase gained 0.49%.
STAR Board-listed robotics maker Unitree gained +6.29% on chatter that Tesla’s Optimus production will start by year-end 2027.
Hong Kong's healthcare sector had a good day. Wuxi AppTec gained +1.21% after the Pentagon removed it from its list of companies associated with the Chinese military.
The ETFs favored by China's "National Team", i.e., investment firms associated with sovereign wealth, had below-average volumes overnight, especially large-cap-focused ETFs. However, a mid-cap ETF had above-average volume. The 17 ETFs that we are currently tracking saw only $360 million worth of net buying on Monday. That is compared to the $73.26 billion worth of net inflow in the last month. All told, it was a quiet night!
Politico had an article last week titled “Top Senate oversight Democrat gears up for offensive against Trump-linked firms” on Democrats' efforts to target companies that supported President Trump. The article focused on cryptocurrency companies, though it also referred to letters sent to dozens of US companies that donated to Trump’s ballroom renovation. The companies that received the letter spanned finance and technology, including Nvidia! In my opinion, the Jensen Huang's scandal could simply be the start of the political retribution. In DC, an "eye for an eye" is still the rule, sometimes.
Real estate brokerage platform KE Holdings (Ticker: BEKE) bought back 245,418 shares.
Last Night's Performance
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.66 versus 6.67 yesterday
- CNY per EUR 7.48 versus 7.47 yesterday
- Yield on 10-Year Government Bond 1.60% versus 1.59% yesterday
- Yield on 10-Year China Development Bank Bond 1.65% versus 1.64% yesterday
- Copper Price +0.50%
- Steel Price -0.20%
