The market's reaction to Meta Platforms, Inc.'s (META) move to sell excess AI computing capacity was unexpected, causing a significant sell-off in global AI-related stocks. While A-shares suffered heavy losses, the Hong Kong market remained relatively stable, with the Hang Seng Index actually rising 0.76%, largely due to its lower weighting in technology stocks. The news, reported on July 1st US time, indicated Meta plans to sell surplus AI compute to external clients, following its earlier announcement of capital expenditures reaching $145 billion this year. Additionally, reports surfaced that OpenAI has developed optimization solutions that could reduce inference run costs by over 50%. With AI stocks at elevated levels and skepticism already prevalent, these developments intensified market fears of an AI investment bubble. This led to sharp declines during the session, with SanDisk and CoreWeave dropping over 10%. South Korea was hit particularly hard, with the KOSPI index falling 8% in the afternoon and SK Hynix shares plunging as much as 14%, erasing approximately $160 billion (or about 1 trillion Chinese yuan) in market capitalization in a single day, bringing its total market cap down to around $1 trillion.
Given that domestic orders are closely tied to the US and South Korea, spillover effects were inevitable, leading to widespread declines of over 10% for all technology-related stocks in Hong Kong. In reality, Meta's action is likely a strategic adjustment to alleviate financial pressure. After all, Elon Musk also leased XAI's capacity to Anthropic and Alphabet (GOOG). Concerns about a compute glut may be overblown. Consider the immense and ever-growing computational power required for training and inference models. AI adoption is still in its early stages, and future technological advancement is fundamentally built on compute infrastructure. It's unlikely development will halt. Whether Meta adjusts its Capex is a dynamic decision, with clarity expected only after its Q2 report, but procurement of high-end computing resources is likely to continue.
Other tech giants are also adapting. NVIDIA (NVDA) is offering GPU leasing and financial backstops to emerging cloud providers to ease their financing challenges. OpenAI is reportedly offering a 5% stake to the government, seeking official backing to secure further funding for operations, a strategy similar to Intel's past approaches. In essence, US tech giants have significant concerns, as their potential struggles could ripple through the entire US stock market and national economy. Domestically, the push to advance AI and pursue import substitution remains unwavering. Therefore, the tech sector's decline is likely a necessary correction following an overextended and crowded rally, with opportunities likely to re-emerge.
On July 1st, newly appointed Fed Chair Warsh stated at the ECB's Global Central Bank Forum that US inflation expectations and upside risks have declined in tandem over the past four weeks. This, combined with weaker-than-expected readings for both the S&P Global and ISM Manufacturing PMIs for June, significantly dampened market expectations for a Fed rate hike in September. Spot gold rebounded on Wednesday, briefly reclaiming the $4,100 per ounce level. CHINAGOLDINTL (ASX: 02099) and CHIFENG GOLD (ASX: 06693) both surged over 10%. For gold's future trajectory, reference can be made to the World Gold Council's "2026 Global Gold Market Mid-Year Outlook" released on July 1st. It suggests that barring any major fundamental shifts, gold is likely to trade within a range of ±5% around $4,100/oz in the second half of the year. While a renewed uptrend is feasible, it would require a clear and powerful catalyst.
Currently, the healthcare sector appears to be the primary beneficiary of capital rotating out of technology, with Business Development (BD) deals providing further catalysts. CSPC PHARMA (ASX: 01093) saw its shares jump over 8% after its controlling subsidiary, Jushi Biologics, signed a collaboration, option, and licensing agreement with AstraZeneca, which will pay an upfront fee of $30 million. Similar thematic plays like DUALITYBIO-B (ASX: 09606) surged more than 15%. Other gainers included REMEGEN (ASX: 09995), SKB BIO (ASX: 06990), Innovent Biologics (ASX: 01801), and Akeso Inc. (ASX: 09926), all rising over 7%.
Further boosting the sector, China's National Medical Products Administration (NMPA) issued an announcement on June 30th specifying that four categories of chemical active pharmaceutical ingredient (API) marketing applications will be eligible for priority review and approval, effective August 1, 2026. Under the current review system, priority review typically takes 130 working days, compared to over 200 working days for the standard API review pathway. This news propelled shares of Federal Pharmaceutical (ASX: 03933), China Medical System (ASX: 00867), and Simcere Pharmaceutical (ASX: 02096) up more than 9%.
The robotics catalyst, as often is the case, stems from Elon Musk. Recent visits to the Optimus production line and shared interview details with Tesla VP Lars indicate that automated production lines are being built in Germany, with the first line already shipped and ready for installation. Other lines are undergoing on-site acceptance testing in Germany. Theoretically, production could commence within a week of delivery from Germany. Optimus has about 40 sub-production lines, aligning with the targeted August production start. Separately, the China Securities Regulatory Commission has approved the registration for the initial public offering of Unitree Robotics. Key supply chain players include Sanhua Intelligent Controls (ASX: 02050), Minth Group (ASX: 00425), and Lingyi iTech (ASX: 01688). Domestic robotics leaders to watch are Estun Automation (ASX: 02715), RoboSense (ASX: 02498), Horizon Robotics-W (ASX: 09660), and Hesai-W (ASX: 02525).
JLMAG Rare-Earth (ASX: 06680) expects first-half net profit attributable to shareholders to be between 400 million and 460 million yuan, a year-on-year increase of 31.17% to 50.84%. Notably, its revenue from the robotics and industrial servo motor sector grew approximately 90% year-on-year, with small-batch deliveries of motor rotor products for embodied robots already underway. Its shares rose over 12% today.
Starting July 1st, two mandatory national standards for electric vehicles, "Electric Vehicle Safety Requirements" and "Safety Requirements for Traction Batteries of Electric Vehicles," formulated under the leadership of the Ministry of Industry and Information Technology (MIIT), officially took effect nationwide. Dubbed the "strictest ever" regulations by the industry, they set red lines: batteries must be "non-flammable and non-explosive," and vehicles must be equipped with "physical power disconnection" mechanisms. Leading companies like CATL (ASX: 03750), BYD (ASX: 01211), and Geely (ASX: 00175) have reportedly already met these standards ahead of time, with "exceeding national standards" becoming the new competitive battleground. Companies failing to comply will face elimination.
Regarding sales, June 2026 new energy vehicle (NEV) sales figures are being released, largely meeting market expectations. BYD (ASX: 01211) led with sales of 403,472 units in June, up 5% both year-on-year and month-on-month, its shares surging over 8% in recent days. Geely Auto (ASX: 00175) reported total wholesale passenger vehicle volume of 240,800 units in June, up 2% year-on-year and 1% month-on-month; its NEV wholesale volume jumped 32% year-on-year and 21% month-on-month to 161,400 units, with shares up nearly 3% today. XPeng (ASX: 09868) delivered 40,126 vehicles in June, up 16% year-on-year and 25% month-on-month; its Q2 deliveries totaled 103,300 units, meeting its guidance of 100,000 to 106,000 units. Its shares rose over 2% today.
Goldman Sachs has turned its attention to China's pork sector. In a June 30th report, analyst Trina Chen and colleagues noted that "with cash profits negative for almost all producers, the supply response will accelerate, including reductions in breeding sows, policy pushes, and more capacity exits," maintaining their forecast for a hog price recovery in the second half of 2026. Their base case assumes live hog spot prices will recover from the current ~9.4 yuan/kg to 15.0 yuan/kg in the second half. Domestic research reports also suggest hog supply pressure may gradually ease in H2 2026. Considering seasonal demand support, Q2 2026 could mark the cycle's low point, with prices potentially turning upward in the second half. Cost advantage is a key factor for pig farming companies, and with sector valuations near decade lows, investment value is becoming apparent. Stocks like Dekon Agri (ASX: 02419), Muyuan Foods (ASX: 02714), and COFCO Jiakang (ASX: 01610) have rebounded from their lows.
In May, the US added 172,000 non-farm payrolls, while the unemployment rate held steady at 4.3% for the third consecutive month. The hot data was a key reason for the market's swift rise in Fed rate hike expectations at the time. Looking ahead to tonight's June non-farm payrolls report, a media survey shows economists generally expect an increase of 113,000 jobs. A lower-than-expected figure would be positive for markets, though the unemployment rate will also be closely watched.
Key Sector Highlights
On July 2nd, lithography giant ASML raised its full-year revenue guidance, citing continued strong demand for advanced lithography equipment related to AI chip manufacturing. Leading global foundries like TSMC and Samsung are accelerating the adoption of high-NA EUV lithography systems to meet demand for AI accelerators, further solidifying expansion plans for 3nm and more advanced process nodes.
Also on July 2nd, exclusive reports indicated that Kingsoft Cloud will accelerate the construction of GPU computing clusters in the second half of the year to meet the explosive growth in computing demand from major clients. Specifically, Xiaomi's GPU computing needs from Kingsoft Cloud have escalated from a ten-thousand-card cluster to an ultra-large-scale computing cluster, with the related investment budget increasing from an initial nearly 4 billion yuan to over 10 billion yuan. Furthermore, Alibaba's large model team has signed a five-year computing power leasing contract with Kingsoft Cloud, involving over 3,000 eight-card GPU servers. Based on the contracted monthly rental price, the monthly revenue stream after full delivery is estimated at around 300 million yuan, with annualized revenue exceeding 4 billion yuan.
These developments underscore that AI demand remains robust. Related stocks to watch include SMIC (ASX: 00981), Huahong Grace (ASX: 01347), Biren Technology (ASX: 06082), ASMPT (ASX: 00522), and Kingsoft Cloud (ASX: 03896).
In-Depth Stock Analysis
SKB BIO (ASX: 06990): ASCO Phase III Data Provides Sustained Catalyst; Pipeline Progressing Smoothly
The positive data from the Phase III OptiTROP-Lung05 study for the company's core product, sac-TMT, combined with pembrolizumab as first-line treatment for PD-L1-positive NSCLC, continues to generate momentum. This study is the first global Phase III trial to show positive results for an ADC combined with immunotherapy in first-line NSCLC, with a hazard ratio for PFS of 0.35 and a 12-month PFS rate of 62.4%, far exceeding the control group's 29.0%.
Analysis: The company's landmark pipeline partnership with global pharmaceutical giant Merck & Co. in 2022 established sac-TMT as a flagship product in China's innovative drug out-licensing wave. The global clinical development of sac-TMT is progressing smoothly, demonstrating best-in-class potential. As it approaches the commercialization stage overseas, the collaboration with Merck opens significant market potential. Market confidence in sac-TMT's overseas prospects is bolstered by three key factors: 1) Positive clinical data increases the probability of approval and expected market share; 2) The unexpectedly large scale of the global Phase III studies initiated by Merck reinforces confidence; 3) A renewed market recognition of the overseas capabilities of China's broader innovative drug industry.
Merck's core product, pembrolizumab, achieved sales of $31.7 billion. With its US patent set to expire in 2028, Merck is proactively preparing for the patent cliff by building a rich pipeline across five therapeutic areas: oncology, cardiovascular & respiratory, anti-infectives, autoimmune diseases, and ophthalmology. Within oncology, its pipeline is projected to contribute $25 billion in sales by the mid-2030s, with over half expected to come from ADC candidates. Merck has initiated 27 registrational clinical studies for its ADC pipeline, with 17 Phase III studies already launched for sac-TMT alone. Based on the proportion of Phase III investment, sac-TMT is a cornerstone of Merck's oncology pipeline. Leveraging early Chinese research data from SKB BIO, Merck has adopted a comprehensive and meticulous clinical trial strategy for sac-TMT, initiating numerous Phase III studies in new indications. As data from Chinese studies continues to accumulate, sac-TMT's best-in-class status becomes increasingly clear. Combined with Merck's rapid global advancement of multiple registrational studies, data maturity is approaching, with the estimated overseas sales peak for sac-TMT projected at $15 billion.
Furthermore, the company's partner, Windward Bio, has completed the first patient dosing in a Phase II study for the ultra-long-acting anti-TSLP antibody SKB378/WIN378 for treating COPD, indicating smooth pipeline progress. SKB BIO is expected to achieve profitability by 2027, with the clinical value of its core product sac-TMT likely to increase significantly in 2026 and potential US approval anticipated in 2027.
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