From the studio

Video: The AI Show: CIO's Sundeep Gantori on GPT-5 and AI chip sales to China

Thought of the day

US equities extended gains on Wednesday, with both the S&P 500 and the Nasdaq recording all-time highs for the second straight day. The S&P 500 has risen nearly 10% this year, while the tech-heavy Nasdaq is up over 12%.

However, some of the largest tech firms fell amid a broad rotation into growth laggards and value stocks. Weaker-than-expected guidance from companies in the artificial intelligence (AI) supply chain, talk of a potential delay in NVIDIA’s next-generation chips, and CoreWeave’s bigger-than-expected second-quarter loss have all contributed to the rotation. Meanwhile, Tencent delivered another strong set of results, beating both revenue and earnings forecasts.

Without taking any single-company views, we continue to hold a strong conviction in AI’s long-term growth . But the latest rotation reinforces our view that investors should seek a more balanced positioning in the near term across the AI value chain, including exposure to AI laggards such as internet and software companies, and China’s tech sector.

Internet and software companies should continue to benefit from rising AI monetization. The software and internet industries have typically been the more defensive segments within the tech sector, and we think this characteristic is especially relevant with tech valuations at elevated levels. While AI revenue growth has yet to match the industry’s aggressive spending, rising monetization and AI adoption trends have been encouraging. Cloud revenues at the three largest platforms grew by more than 25% y/y in the June quarter, and we expect Big Tech’s capex intensity (capital spending divided by sales) to moderate after a period of heavy investm ent.

China tech’s outlook is supported by strong fundamentals and ongoing innovation. Tencent’s cloud business saw its revenue growth pick up in the second quarter due to rising enterprise demand for AI-related services, and the company’s management highlighted that it has sufficient chips for AI training and multiple options for inferencing. Without commenting on single securities, the recent relaxation of US chip sales to China amid easing relations between Washington and Beijing should support China’s tech sector. We maintain our Attractive rating given its robust earnings growth, attractive valuation, Beijing’s explicit policy support, and accelerating AI adoption in the country.

Cyclical risks in the AI supply chain may weigh on revenue growth in the near term. Consistent with our view that growth will decelerate in the AI supply chain in the near term due to strong front-loading of shipments in the first half of this year, two Taiwanese AI server rack suppliers this week provided muted guidance for the second half of 2025. While this is partly due to a solid upgrade cycle in cooling systems over recent quarters, the semiconductor industry is facing near-term cyclical risks, and we believe that the destocking cycle could weigh on revenue growth for the next few quarters.

So, we recommend a diversified and balanced exposure across the AI value chain, with a preference for laggards where we see an attractive risk-reward. Investors can also consider structured investments, such as capital preservation and put-writing strategies, to take advantage of any volatility in the near term, subject to awareness of their unique risks.