CITIC SEC released a research report stating that the suspension of data center construction in Texas, the "politicization" of data centers may be the biggest short-term obstacle to the AI narrative. As for Hong Kong stocks, since 2026, due to limited incremental capital, the rotation effect between different sectors has significantly strengthened, especially amid the ongoing tightening of overseas liquidity. With a relatively limited total amount of capital, technology and biotechnology, as the two growth tracks in the Hong Kong stock market with higher elasticity and valuations more sensitive to liquidity, are more prone to forming a seesaw allocation relationship. Meanwhile, as southbound capital inflows have been relatively weak in 2026, especially since June when foreign capital has continued to flow back into Hong Kong stocks, foreign capital has dominated marginal pricing power. Therefore, against the backdrop of foreign capital continuously flowing out of Hang Seng Tech and into biotechnology, a pattern of Hang Seng Tech being relatively weak and biotechnology being relatively strong has formed. Overall, under the high interest rate environment, both the Hang Seng Tech Index and the Hang Seng Biotech Index are significantly under pressure. Under the current expectation of tightening global liquidity, investors are advised to prioritize high-quality sectors with strong defensive attributes and stable dividends, such as power, telecommunications, and utilities.
The main views of CITIC SEC are as follows: AI companies have diversified financing channels, and the potential financing volume they could absorb in 2027 may exceed $740 billion. This week, US Treasury yields surged again, while credit spreads on US corporate bonds rated B and below also began to rebound. The simultaneous rise in risk-free rates and credit spreads once again led some investors to worry about the sustainability of US AI financing. However, the firm believes that US AI companies have relatively diversified financing options. In addition to debt financing, they can also support future CAPEX through equity financing, industrial capital, and reduced share buybacks. Over the past two years, the main financing channel for US AI companies' CAPEX has been the debt market, while the only equity market financing case was Google's $85 billion this year, possibly because US listed companies have long sought to avoid diluting existing shareholder equity. In the debt market, the financing process for US AI companies over the past two years has also been quite smooth. According to Bloomberg, in the first half of this year, the five major US hyperscalers raised $167.8 billion in the global public bond market; Meta and Anthropic also raised $27 billion and $35 billion in the private bond market in 2025 and this year, respectively. In addition, if subsequent financing demand in the equity and debt markets is exhausted, US listed companies may also consider reducing share buybacks to support CAPEX. Based on data from Wind, Bloomberg, and Norges Bank, comprehensively considering the US stock market, global bond market (public and private bonds), syndicated loan channels, potential conversion of US listed companies' buyback funds to CAPEX, and financing from US industrial capital and sovereign wealth funds, under a neutral scenario, the firm estimates that the volume that could absorb US AI companies' CAPEX in 2027 is $742 billion.
The suspension of data center construction in Texas, politicization may be the biggest short-term obstacle to the AI narrative. This week, the US state of Texas halted data center construction, and Oracle also issued a force majeure notice to the developer of Project Jupiter, hoping to delay payments if the project does not come online by 2028 as contracted. Combining these two developments, the firm judges that data center construction will be one of the most important directions of bipartisan contention around the midterm elections. In addition to the "timing" constraint of power grid interconnection and the weakening of "geographic" conditions caused by stricter administrative approvals, the "human" conditions for US data center construction are also showing a trend of marginal deterioration. The reasons why US residents oppose data centers being built in their communities mainly fall into two categories: one is factors such as noise and water use that affect living experience, and the other is factors such as rising electricity prices and land and property depreciation that directly affect household economic interests. As NIMBY sentiment in the US heats up, the risks faced by data center projects are no longer limited to stricter early-stage government approvals and rising resident communication costs, but also include legal disputes that may continue to occur during project construction, further triggering approval restarts, site adjustments, or even project cancellation, thereby increasing the delay risk in the conversion of commercial commitments such as signed-but-not-yet-leased leases by hyperscalers into actual capacity. Therefore, the 2026 US midterm elections may become an important political variable that further amplifies industry regulatory risk. If the Democratic Party wins the House of Representatives, it may push data center-related issues to receive greater congressional attention and extend the fulfillment cycle of projects from planning to operation, thereby increasing the computing power delivery delay risk faced by hyperscalers that have already formed commercial commitments.
In the third quarter, US stocks and bonds performed significantly divergently, and there may be rebalancing demand at quarter-end. From the third quarter through September 24, the S&P 500 rose 2.73%, while TLT, which tracks US Treasuries with maturities of more than 20 years, fell 8.10%, with a single-quarter return gap of 10.83 percentage points, at the 80th percentile since 2002. Looking back at history: among the 34 historical samples where the single-quarter stock-bond return gap exceeded 8 percentage points, TLT rose by an average of 0.8% in the next quarter, with 18 positive instances; raising the threshold to 10 percentage points, among the 23 samples, TLT rose by an average of 0.4% in the next quarter, with 11 positive instances. Based on this, the firm judges that after a large stock-bond divergence, US Treasuries have a certain tendency toward mean reversion, but the magnitude is limited and the win rate is only slightly above half. What rebalancing brings is more likely a moderate stabilization of TLT rather than a trend reversal. By comparison, momentum continuation in US stocks has been more stable historically. In the above two event samples, the S&P 500 rose by an average of 2.4% to 2.6% in the next quarter, with declining samples accounting for less than 30%. Based on this, the firm judges that the marginal impact of quarter-end rebalancing on US stocks is weaker than market intuition, and there is insufficient basis for significantly reducing US stock allocations and substantially increasing US bond allocations; a more reasonable judgment is that the bond market stabilizes in the short term, relative returns in US stocks continue, and the medium-term pattern of stocks outperforming bonds has not changed.
Since June 2026, the seesaw effect between Hang Seng Tech and Hang Seng Biotech has significantly strengthened. Since 2026, due to limited incremental capital, the rotation effect of capital among different sectors has significantly strengthened. With a relatively limited total amount of capital, technology and biotechnology, as the two growth tracks in the Hong Kong stock market with higher elasticity and valuations more sensitive to liquidity, are more prone to forming a seesaw allocation relationship. At the same time, as southbound capital inflows have been relatively weak in 2026, especially since June when foreign capital has continued to flow back into Hong Kong stocks, foreign capital has dominated marginal pricing power. Therefore, against the backdrop of foreign capital continuously flowing out of Hang Seng Tech and into biotechnology, a pattern of Hang Seng Tech being relatively weak and biotechnology being relatively strong has been promoted. Overall, under the high interest rate environment, both the Hang Seng Tech Index and the Hang Seng Biotech Index are significantly under pressure. Under the current expectation of tightening global liquidity, investors are advised to prioritize high-quality sectors with strong defensive attributes and stable dividends, such as power, telecommunications, and utilities.
Risk factors: 1) Global central banks continue to tighten monetary policy beyond expectations; 2) Global geopolitical conflicts escalate again; 3) Frictions in the China-US technology, trade, and financial sectors intensify; 4) The US tightens approvals for data center construction beyond expectations; 5) China's policy intensity, implementation effects, and economic recovery fall short of expectations.
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