The latest Market Talks covering Technology, Media and Telecom. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET.
1139 ET - Private-equity firms have reduced their investments in software compared with previous years, favoring asset-heavy businesses whose products and services are considered less prone to replacement by artificial intelligence, according to a report by the law firm Sidley Austin. The technology sector represented roughly 13% of value of U.S. buyouts this year through June, down from an average of about 30% in the five-year period through last year, Sidley says. "The pullback in activity also illustrated potential vulnerability in software valuations," the firm says. It adds that instead of resolving valuation disputes through negotiation of deal financials, "buyers and sellers now increasingly disagree on [the] more fundamental question" of how vulnerable a software business is to AI-driven disruption. (luis.garcia@wsj.com)
0619 ET - Grab's takeover of buy-now pay-later platform Atome comes at a high price, Peter Milliken of Deutsche Bank research writes in a note. Grab is "paying top dollar" to expand its buy-now pay-later business six-fold, Milliken says. The two-tranche structure of the deal suggests that Atome is expected to generate around $200 million in adjusted Ebitda by 2028, Milliken adds. "Grab likes the idea of using its combined data to improve both companies' credit models, and scaling the foundational infrastructure across a much larger loan book," Milliken says. DB retains a buy rating but trims its target price to $5.60 from $6.40. Shares closed at $2.80 on Friday. (kimberley.kao@wsj.com)
0610 ET - Singtel's shares could benefit from rerating catalysts, Macquarie Capital research analyst Zhiwei Foo says in a note. Every S$300 million of contracts won by Singtel's GPU-as-a-Service business, RE:AI, is estimated to drive a S$0.12 increase in the stock's fair value, assuming all else is equal, according to Foo. Singtel may revisit its conservative Ebit outlook in November, says Foo, who estimates a 12% Ebit increase for the year ending March, above the company's guidance. The results will likely be driven by Optus in Australia and the digital-infrastructure and AI businesses, Foo adds. Macquarie retains an outperform rating on the stock but lowers the target price to S$4.98 from S$5.29 on lower fair values for regional associates and significantly weaker foreign-exchange rates. Shares close at S$4.33. (kimberley.kao@wsj.com)
0549 ET - The AI bubble hasn't burst yet, according to Capital Economics' Thomas Mathews in a research note. "We don't think the fall in tech stocks' relative valuations means the AI bubble has burst yet, and the rally may have a bit further to go," the head of markets of Asia Pacific says in a note. If oil prices keep falling, and manage to bring yields with them, a tech-led relief rally is therefore possible even though the index hasn't fallen that much, he says. "There's potential for market-moving news at the U.S.-China meetings, but our best bet is that progress, and any resultant market reaction, will be minor," he adds. (tracy.qu@wsj.com)
0507 ET - Malaysia's 2027 budget will likely be a pre-election budget on a compressed timeline, with greater focus on cost-of-living relief and household support, Kenanga economists say in a note. The government is expected to maintain gradual fiscal consolidation while prioritizing spending on AI, semiconductors, digitalization and infrastructure. The economists expect the fiscal deficit to narrow to 3.5% of GDP in 2027 from an estimated 3.8% in 2026, supported by economic growth and lower subsidies. Malaysia is unlikely to introduce broad-based tax reforms, with efforts focused instead on improving tax compliance and collection, they say. The budget is expected to target 2027 GDP growth of 4.5%-5.5%, driven by domestic demand, structural reforms and projects under the five-year development plan, they add. (yingxian.wong@wsj.com)
0459 ET - Some Chinese humanoid-robot component suppliers stand to benefit from higher U.S. robot production, Citi analysts write in a research note. The bank's supply-chain checks in China suggest that the leading U.S. humanoid-robot maker could ramp up weekly production nearly 10 times to about 1,500 units in October. Weekly output could increase further to 2,000-2,500 units by end-4Q or early 1Q, Citi adds. That will likely have positive implications for relevant Chinese humanoid-robot component suppliers, including Jiangsu Hengli Hydraulic, Zhejiang Shuanghuan Driveline and Leader Harmonious Drive Systems, it says. (tracy.qu@wsj.com)
0412 ET - Shares of European semiconductor companies start the new week in green territory, building on gains from Friday. Investors have rewarded stocks exposed to artificial intelligence in recent days. In Asia, South Korea's SK Hynix closed 0.6% higher, while Samsung Electronics closed up 5%. In Europe, shares of Dutch semiconductor-equipment maker ASML Holding and smaller rival ASM International are up 2.8% and 1.9%, respectively. BE Semiconductor Industries, the Dutch supplier of semiconductor assembly equipment, is up 0.1%. German chip maker Infineon Technologies gains 2.4%. STMicroelectronics shares are up 2.3%. Meanwhile, the E-mini Nasdaq 100 futures contract edged 0.8% higher, pointing to a positive opening for tech stocks in the U.S. (mauro.orru@wsj.com)
0211 ET - South Korea's aggressive investment in artificial-intelligence infrastructure could strain the credit profiles of companies participating in the AI buildout, S&P analysts say. The country could invest about $900 billion in data centers over the next decade, significantly expanding data-center capacity for telecom and other companies, analysts led by James Kim write in a note. Investment burdens would rise sharply for participating companies, weighing on their credit profiles, they say. The country's aggressive AI buildout--which focuses on data centers, semiconductors and physical AI under President Lee Jae Myung's "Three Mega Projects" initiative--could require 1,800 trillion won to 2,000 trillion won, equivalent to $1.3 trillion-$1.4 trillion, in investments over the next decade for chips and data centers alone, they add. (kwanwoo.jun@wsj.com)
0109 ET - Indonesia's colocation data-center capacity is expected to grow six times between 2026 and 2030, even after accounting for potential construction delays, Nomura analyst Ahmad Maghfur Usman says in a note. The bank initiates coverage of Total Bangun Persada at buy with a target price of 2,000 rupiah. The analyst says DCI Indonesia and unlisted Digital Edge have already started a major building phase and are expected to control 46% of the 4.8 gigawatts of planned capacity after 2030. Shares of Total Bangun Persada are up 3.6% at 1,600 rupiah, while DCI is flat at 202,000 rupiah. (venkat.pr@wsj.com)
0037 ET - China's ongoing AI boom is likely to widen both demographic and geographic inequality, which could further dent demand, say Nomura economists in a note. The current status of the economy could be best described as a big divergence characterized by domestic weakness. "We expect Beijing to initiate a new round of supportive measures," they say, but expect the scale of such measures to be limited. Considering ample market liquidity and falling government bond yields, Nomura maintains its forecast for no rate cuts until 2Q next year. (monica.gupta@wsj.com)
2057 ET - The chip-industry boom is expected to generate substantial corporate cash in South Korea, with the extent to which companies repatriate overseas earnings likely to be a key determinant of domestic financial-market dynamics, Goldman Sachs analysts say. South Korean semiconductor companies are projected to generate roughly 150 trillion won in net cash, equivalent to 4.9% of gross domestic product in 2026, and the figure could rise to 9.3% of GDP in 2027, analysts led by Irene Choi write in a research note. Historically, companies have repatriated around 60% of their foreign-affiliate earnings on average, they note. They expect wage and dividend payments by major chip companies to reach 5.2% of GDP in 2027, the highest level in the available historical data. (kwanwoo.jun@wsj.com)
2041 ET - Japanese bank stocks look relatively attractively valued, as the potential benefit of rising interest rates doesn't appear to be fully priced in, T. Rowe Price's Daniel Hurley says in a note. The U.S. asset manager expects the Bank of Japan to continue to tighten, which will likely present a stock-selection opportunity, the portfolio specialist for Japanese equity strategy says. While T. Rowe Price remains constructive on the long-term potential of artificial intelligence, growth expectations are already reflected to a significant extent in the valuations of many AI stocks, the U.S. asset manager says. Improving corporate governance, stronger capital discipline, dividends and share buybacks can also support companies even where underlying earnings growth is relatively modest, it says. Japan's stock market is closed for holidays Monday through Wednesday.
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