Apple pullback overdone? ETF flows favour China chips. US CPI, to point to stagflation?
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Apple's pullback may be short-lived amid the China iPhone ban; plujs other implications?
Apple's pullback may be short-lived amid the China iPhone ban; plujs other implications?
Apple shares are down 9% from their high. They lost 6% of that last week as China wants to expand its ban on iPhones to government-backed agencies and state companies. How could this likely damage Apple, but can Apple offset the revenue loss? What Chinese mobile companies might benefit
1- There are about 56.3m people who work for state-owned corporations in China. Double that amount of people, work in the private sector.
2 - Apple $Apple(AAPL.US$ sales in China account for ~19% of group revenue. So potentially, maybe 9.5% of Apple's revenue could be hit IF the ban is enforced. But in reality, the number will be a lot less than that, as Apple sells other devices in China (the intended ban is only on iPhones in the public sector).
3 - What companies could be impacted by the ban on Apple in China? Click here to see the companies to watch including Qualcomm $Qualcomm(QCOM.US$.
4 - Many think Apple's share price pull pack won't last and its 9% drop is overdone. Why? And how can Apple ride out the wave?
4a - Well, consider Apple's $Apple(AAPL.US$ global services revenue is bigger than total China sales and is growing at a faster pace (seeing the strongest growth). Plus the rollout of AV/RV headsets and the Apple car could potentially offset the potential wipeout of half of China's iPhone sales.
4b - Apple may seem expensive when you look at its price-to-earnings ratio (PE), but consider, that at the end of this month, Apple shares will be compulsorily bought amid the end of the quarter rebalancing.
5- Apple's event this week could be a catalyst for a pickup in long-term revenue growth. Apple is expected to unveil its iPhone 15 with a longer battery life, faster charging, all with a higher price tag. Apple is due to also unveil updated watches and Airpods, all which could give Apple revenue another boost
6- Separately, amid the China ban, consider the Chinese companies and supplies that could benefit. Morgan Stanley expects the Chinese smartphone maker Huawei to garner 10% of the country's 5G market share next year, even though its smartphone shipments are constrained by chip supply due to US export controls.
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Beijing empowers Chinese firms to compete with OpenAI and MSFT. Flows into chips dominate
ETF flows are funnelling into China after Beijing approved the first batch of generative artificial intelligence services for public rollout. Chinese tech giants Baidu $Baidu(BIDU.US$, Alibaba $Alibaba(BABA.US$, $Tencent(TCEHY.US$, and Huawei have been given powers to develop tech to compete with the likes of OpenAI $Chatgpt Concept(BK1347.HK$ and Microsoft $Microsoft(MSFT.US$ As such, global ETF flows are streaming into semiconductor companies that can support China's tech leaders in the AI race.
The AI and chip landscape. 6 things you need to know
1 - Arguably, investing in AI and chips may be the biggest investment opportunity of this generation.
2 - Consider the majority of AI chips globally, now go into data centres. However, the market has not factored in what will happen when AI chips are added to everyday devices. It will create a new market for AI chip providers.
3- I always say where macro funds go, investments flow. What we need to consider right now is; spending on AI is expected to have grown 900% from 2020 to 2026. Thereafter, the spending growth rate is 30% pa. However, now that China has stepped up, those figures could swell.
4 - So far this month, the second most bought ETF globally is the ChinaAMC CSI Science and Tech Innovation Board 50 ETFs, which gives investors exposure to chip makers based in China. While the ETF with the most flows is Vanguard's S&P500s ETF (VOO) $Vanguard S&P 500 ETF(VOO.US$.
5 - China's biggest chip makers to watch include; Semiconductor Manufacturing International Corporation (SMIC) $SMIC(00981.HK$, HiSilicon and Yangtze Memory Technologies Corp (YMTC).
6 - US domiciled ETFs to keep on your radar include; iShares Semiconductor ETF (SOXX) $iShares Semiconductor ETF(SOXX.US$, VanEck Semiconductor ETF (SMH) $VanEck Semiconductor ETF(SMH.US$ and SPDR S&P Semiconductor ETF ( $Spdr Series Trust Spdr S&P Semiconductor Etf(XSD.US$).
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US CPI ahead. The opportunity in energy amid stagflation
This week investors will get a stagflation wake-up call, with US CPI expected to rise again, to its highest level since 2022 (YoY). We cover what you need to watch, and why you need to consider having some exposure to energy companies.
1 - This week's narrative is all about inflation staying higher for longer as, oil, electricity, gas, and food prices are on the rise, as well as travel prices, which are pushing up US CPI YoY.
2 - US CPI is expected to climb from 3.2% to 3.6% YoY in this week's monthly read.
3 - Air travel costs are up 60% pre-prices in some instances. And these are not likely to come down.
4 - The average cup of coffee has gone up 30% in 12 months year. These prices aren't coming down either. I got a coffee on the weekend that was $6.50.
5 - The bottom line is that inflation is much sticker. And that means higher interest rates for longer.
6 - Oil prices are up 10% YTD. Up 31% since June.
7- El Nino will likely cause more record temperatures; meaning more demand for oil, while oil supply is being restricted by Saudi Arabia and Russia.
8- What's alarming is US oil inventory/stockpiles are the lowest since December 2022.
9 - And we're three months away from peak energy season. So you can expect energy companies to stand tall. Either way they'll highly likely see higher earnings in the next quarter and year ahead.
10 - Next year will be a different story though...
Invest in your financial future today.
Happy investing.
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The information is general in nature and has been prepared without considering your financial objectives, situation or needs.
Consider the appropriateness of this information in light of your personal circumstances before making investment decisions.
Consider the appropriateness of this information in light of your personal circumstances before making investment decisions.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
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SpyderCall : Good stuff in this article
Jessica AmirOP SpyderCall: Thank you. That means a lot coming from you
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