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.
0818 GMT - Shares of European semiconductor companies are mixed after a tumultuous week in which investors dumped stocks exposed to artificial intelligence. Strong inflation data in the U.S. raised fears that the Fed could hike interest rates and bump up the cost of debt that many companies are taking on to finance AI. Shares of Dutch semiconductor-equipment maker ASML Holding are up 1.1%, while those of smaller rival ASM International are down 0.1%. Dutch supplier of semiconductor assembly equipment BE Semiconductor Industries is up 2.2%. German chip maker Infineon Technologies and rival STMicroelectronics are both down 0.1%. Meanwhile, the E-mini Nasdaq 100 futures contract is 1.1% higher, pointing to a strong opening for tech stocks in the U.S. (mauro.orru@wsj.com)
0806 GMT - Underlying artificial-intelligence demand remains robust despite concerns around funding costs, memory competition and earnings uncertainty, Eastspring Investments says in a note. While higher funding costs have raised the investment hurdle for AI infrastructure projects, AI-related backlog at major cloud service providers continue to expand, indicating underlying demand for AI infrastructure remains in a strong growth phrase, Eastspring says. Rising agentic AI adoption could widen demand across the server market, while strong AI chip demand is supportive of foundries with leading-edge capacity, it says. The market's current weakness is creating selective opportunities. "We believe the AI investment cycle remains in its early stages, with opportunities continuing to broaden across the technology supply chain," the asset manager says. (megan.cheah@wsj.com)
0759 GMT - Lenovo's AI infrastructure momentum should be intact despite recent market volatility, Citi analysts say in a research note. While there have been increasing market concerns surrounding highly leveraged AI infrastructure operators like Coreweave, a client of Lenovo, the company's direct exposure to higher-risk neocloud customers remains limited, they say. Citi expects Lenovo's fiscal 2Q revenue to rise 33% on year to US$27.1 billion and its adjusted net profit to reach US$1.18 billion, reflecting intact infrastructure revenue momentum and continued margin improvement. However, Citi lowers Lenovo's target price to HK$40.00 from HK$50.00 reflecting the potential share dilution on convertible bonds and warrants. Shares are 8.0% higher at HK$28.06. (sherry.qin@wsj.com)
0726 GMT - Investors are expected to be increasingly selective in the AI trade, Pepperstone head of research Chris Weston says in a research note. The aggressive selling across AI infrastructure plays, led by Coreweave, indicates investors will likely become more selective than treating the entire ecosystem as one trade, he notes. "The market doesn't need every AI infrastructure company to succeed for the investment theme to work," Weston says. However, the market does need confidence that capital is being deployed into projects capable of generating sustainable economic returns. With the earnings season underway, attention now turns back to the hyperscalers, their AI capex intentions and, increasingly, the returns they're generating on that spending, he adds. (sherry.qin@wsj.com)
0642 GMT - Tencent's weak financial performance will likely be temporary, Nomura analysts say in a research note. Nomura expects Tencent's 3Q revenue to grow 9% from a year earlier and adjusted operating profit to fall 3%. While Tencent's 3Q results are likely to be less robust than in previous years, the analysts think the slowdown reflects the current artificial-intelligence investment cycle and a high base of comparison for games revenue. Tencent has yet to demonstrate an AI product as compelling as those from ByteDance and Alibaba, they say. However, its coming WeChat AI agent has the potential to help establish its position in China's AI market, they add. Nomura cuts Tencent's target price to 659.00 Hong Kong dollars from HK$695.00. Shares are last at HK$417.80. (sherry.qin@wsj.com)
0642 GMT - Tech stocks were back under pressure last week, and financial markets are wondering if this is the beginning of a greater crash, says Thomas Mathews, head of markets in Asia for Capital Economics. His base case remains that it isn't. Volatility in tech stocks should pick up as the AI bubble continues to inflate. Sharp and short-lived sell-offs were common as the dotcom bubble inflated, he adds. Still, that bubble did eventually burst, and this one will too, he says. But for now, the indicators of a bubble don't seem quite stretched enough to call time on the rally. (james.glynn@wsj.com; @JamesGlynnWSJ)
0641 GMT - Fears about the AI buildout are "way overblown," says Dan Ives, partner and analyst at Yorkville Ives, in a note. "We are in a market environment in which any negative data point or hint of nervousness causes panic for the tech sector as this multi-trillion AI foundation buildout is tied to a handful of major tech players," says Ives. Higher rates don't change underlying demand for the buildout, even though it does matter for debt and how the investment gets financed, Ives adds. U.S. stock futures show signs of recovering sentiment in Asian trade. Futures tied to the Nasdaq, Dow Jones Industrial Average and S&P 500 climb 1.4%, 0.4% and 0.7%, respectively. (kimberley.kao@wsj.com)
0022 GMT - Australia's Hipages needs to improve revenue growth and Ebitda margin expansion if its stock is to rerate, Morgan Stanley analysts say. They tell clients in a note that Hipages, which operates a marketplace for consumers to engage with skilled tradespeople, is a well-run and profitable business. They say management is executing solidly on a strategic plan, but that risk return is not hugely attractive relative to other opportunities within Australian tech, media and telco. Customer wins and revenue growth have decelerated, they warn. MS ceases coverage of Hipages with an equal-weight recommendation on the stock, cutting target price by 3.8% to 0.75 Australian dollars. Shares are flat at A$0.845.
Comments