Morgan Stanley has released a research report stating that the development of China's industrial sector in 2026 will continue to revolve around three major themes: the diffusion of AI technology, industrial upgrading, and progress in globalization. The advancement of equipment upgrades and policies against internal competition indicate the government's strong intent to enhance productivity, which will benefit high-end equipment manufacturers. Morgan Stanley is optimistic about GEEKPLUS-W's (02590) opportunity to increase its global market share and believes the company has the potential to successfully transform into an unmanned warehouse solutions provider through other embodied AI product services. The target price is set at HK$37, accompanied by an "Overweight" rating.
The bank stated that, led by industrial upgrades, AI diffusion, domestic replacement cycles, and overseas opportunities, the fundamentals of China's capital goods are recovering. Benefiting from overseas business growth and moving up the value chain, profit margins and return on equity are expected to expand. This trend is clearer in the sub-sectors within an upward cycle. The bank sees automation/robotics, battery equipment, and construction machinery in an upward cycle, while heavy trucks and railway equipment cycles are flattening, and solar equipment is at the bottom of its cycle.
AI, centered on AI infrastructure, is creating equipment opportunities. AI applications are expected to accelerate in 2026 and redefine smart manufacturing. Following strong momentum in 2025, and based on the bank's cloud capital expenditure tracking data, the cloud capex of the world's top 11 listed cloud service providers is projected to be close to $620 billion in 2026, with global/China AI capex remaining robust.
Regarding physical AI capital expenditure, the bank believes the diffusion of AI into the physical world is just beginning, marking the next major phase of AI technology adoption. China is leading the industry in physical AI investment, supported by favorable government policies, funding, and a competitive supply chain ecosystem.
Comments