1. China's "DeepSeek moment" triggered an AI selloff.

Global tech shares sold down on 27 January after new AI model DeepSeek challenged AI capital expediture assumptions. Leading AI chipmaker NVIDIA fell nearly 17% in one session, while AI power names like Vistra and GE Vernova fell some 20-30%. Tech volatility has continued since, with the Nasdaq index down 13.6% from its mid-February peak, as of 28 March.

3. So we buy the dip, and see value in actively investing in AI

Like in many industries, we think a mix of low-cost and high-cost AI solutions can coexist, serving different demands and use cases. Given strong near-term visibility for tech, we remain bullish on the AI theme, including large-cap names, leading cloud platforms, and semis. Tariff- and export-control-related uncertainty may spur more volatility ahead. Investors can potentially take advantage via structured strategies and by buying the dip.

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Q: 2. But we are confident the AI growth story will continue

4Q24 earnings and forward guidance actually suggest only a limited near-term threat to AI capex. We now expect 35% y/y growth in Big 4 capex spending to USD 302bn, driven by strong demand for frontier models. Potentially lower training and inference costs could also accelerate AI adoption in a growing addressable market, boosting AI monetization in the medium to longer term.

Q: 3. So, we believe investors should not lose hope, focusing on past recoveries once uncertainty had been fully priced.

Negative earnings revisions due to tariffs and resulting macro uncertainty are not new for tech. Global tech stocks witnessed earnings revisions in 2018 owing also to a significant tariff escalation. We continue to like semiconductors as well as software and internet names to position for the secular AI trend.

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21 April 2025

Tech stocks has come under renewed pressure as US expands its chip export curbs while tariff uncertainty remains elevated. But while volatility is likely to remain in the near term, we think solid fundamentals of the AI growth story will drive the sector’s long-term outperformance. Structured strategies including capital preservation strategies should be considered in building up long-term exposure, in our view.

While we see further risks over the near to intermediate term, we still view the US technology sector and the AI TRIO (Transformational Innovation Opportunities) as Attractive.

1. Top US AI-related stocks have faced significant headwinds from the mounting global trade conflict.

Uncertainty introduced by US tariff policy has presented headwinds for the sector and looks likely to continue posing near- to intermediate-term headwinds.
The White House did not include semiconductors in this initial round, but on 13 April, President Trump suggested semis and other electronics would face action soon.
The US commerce department announced new export licensing requirements for China-bound shipments of AI chips.

2. But we are confident the AI growth story will continue and the industry remains attractive despite headwinds.

Recent earnings results from semi supply chain companies suggest solid underlying AI demand.
While the tariff situation remains fluid, our base case is for a manageable 3-5% earnings cut for global tech companies. This means global tech earnings should still grow by low teens this year.
The latest US Census Bureau survey on AI adoption across 1.2 million firms showed a strong sequential improvement, and we expect the adoption rate to cross 10% by the end of this year.

3. So, we believe investors should not lose hope, focusing on past recoveries once uncertainty had been fully priced.

New this week

Taiwan Semiconductor Manufacturing Co.(TSMC), the world’s largest contract chip manufacturer, offered some reassurance of the underlying AI demand by maintaining its revenue growth outlook and capital spending projection for 2025. It also kept its forecast that AI-related sales will double this year, and guided for a better-than-expected 2Q net revenue.

Investment view

While uncertainty remains elevated, quality tech stocks should see a strong price-to-earnings multiple rerating once fundamentals are back in focus. Investors can consider structured strategies to build long-term exposure.

Did you know?

During the first trade war in 2018, heightened tech volatility was followed by a 35% rebound in the next 12 months as investors focused on quality tech companies’ solid fundamentals and strong free cash flow generation.
Potentially lower training and inference costs could accelerate AI adoption in a growing addressable market, boosting AI monetization in the medium to longer term.
The artificial intelligence market potential is large—we estimate that AI value creation could amount to USD 1.16 trillion by 2027.

1. AI will be the most profound innovation and one of the largest investment opportunities in human history

2. The ratio of monetization potential of the AI application layer to the costs of the enabling and intelligence layers will become a key metric for investment returns

3. AI will kick off a data center capex cycle that will dwarf general purpose data center capex in the next years

4. The AI silicon moment: AI chips will capture a large part of the AI value creation

5. The AI enablers will be the first adopters of AI, driving both revenue and margin upside

6. Monolithic players will emerge along the AI value chain and over time, the AI market will be dominated by an oligopoly of vertically integrated “AI foundries”

7. Software will become ubiquitous

8. Data assets will emerge as the competitive differentiators for AI adopters

9. Despite the increasing number of new open-source models, proprietary models will remain the top performers

10. The application and intelligence layers will merge with artificial general intelligence (AGI)

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