HKEJ Instant News — China Finance — UBS: European investors still have confidence in China’s AI technology sector — HKEJ.com

UBS China equity strategy research head Wang Zonghao said in a report that although some European investors have taken profits amid volatility in Chinese AI tech stocks in recent weeks, their confidence in the AI tech sector remains firm.

The report said European investors’ understanding of China’s AI tech supply chain has broadened, but there is still room for further penetration. They are watching for disruption potentially brought by Chinese AI models. Since China is ramping up its AI capabilities and related infrastructure to catch up, it is reasonable for investors, over the long term, to allocate part of their portfolios to China’s AI supply chain.

The report noted that investors typically want to focus on high-quality sectors within the AI tech supply chain with high barriers to entry, rather than chase cyclical names that have benefited recently from supply shortages. They also seem to be more familiar with some Chinese semiconductor equipment companies and hold a positive view.

UBS said that aside from AI, European investors have unexpectedly shown interest in China’s biotech, believing this is because they are looking for China’s underexploited areas of innovation.

UBS said European investors overall appear to be more diversified than Asian investors. Even though internet companies’ share prices have underperformed this year, many continue to hold. Investors agree that capital inflows into AI tech stocks are the main reason the internet sector has lagged recently, and that the current lower valuations make large internet stocks a reasonable value-and-defensive play.