Zhongxin Securities has released a research report that the performance of US and China technology stocks driven by the AI theme will be significantly better than that of the domestic market in 2023, and the US technology giant will lead the world. Since the beginning of 2024, the stock prices of US and Chinese technology stocks have fallen significantly. Reviewing the trend of US and Chinese technology stocks and their contributions to valuation and profit in the past ten years, it is judged that the main factors that will determine the trend of US technology stocks in 2024 may be whether AI can truly transform into a driving force for performance release from valuation expansion factors, and macro factors such as the Federal Reserve's balance sheet reduction process and interest rate reduction rhythm. In the Chinese market, it is suggested to focus on AI computing power and cloud computing related companies.

The main points of Zhongxin Securities are as follows:

In 2023, generative artificial intelligence will become a great year for global technology stocks, but there has been a significant pullback since the beginning of 2024.

In 2023, major technology companies around the world have invested heavily in generative AI fields. OpenAI, Microsoft, Meta, Google, and other companies have successively launched products or models such as GPT-4, New-Bing, Llama-2, Gemini, etc., and have received positive feedback from the capital market. The rise of the top technology stocks in the United States leads the global market. The U.S. 7 giants index of the seven largest technology companies in the United States rose 107%, and their total market value surpassed the high point of 2021. Among them, Nvidia, as a leading company in AI chips, rose 240% throughout the year. In other main markets around the world, various technology stock indices have achieved better performance than the market's average level.

In the Chinese market, companies participating in the AI chip industry chain have outstanding performance: Zhongjixuchuang/Industry Funded Enterprise as the representative company of the domestic AI industry chain, rose 299.0%/62.4% throughout the year 2023, and Haiguang Information as the representative target of domestic computing power, rose 68.9%, both significantly outperforming the sector index. During the first two weeks of 2024, technology stocks around the world experienced varying degrees of retracement. After five consecutive trading days of decline, Nasdaq Composite Index rebounded. This was the longest continuous decline in the Nasdaq since October 2022. This reflects the market's concern about whether the future profit level of Nasdaq can support high valuations. Affected by market sentiment in the Chinese technology sector, the Hang Seng Technology Index and the Science and Technology Innovation Board 50 Index have fallen close to the full-year decline in 2023.

In 2023, it was one of the most significant years for the rise of global technology stocks in the past decade. The return from the significant decline in 2022 and the expansion of valuation in 2023 were the main driving forces.

Over the past decade, the growth of US technology stocks has been quite resilient. With the exception of the pullback caused by the significant rate hike by the Federal Reserve in 2022, the major US technology indices have shown certain upward momentum in the following year. In each of the smaller 3-4-year cycles over the past decade, the rise of the Nasdaq index was driven by valuation first, followed by a 1-2-year period of performance realization. During the performance realization period, the support of valuation for the overall index showed a slight fluctuation or downward trend, and the expansion of enterprise EPS supported the continued rise of the overall index. In 2022, the significant rate hike by the Federal Reserve caused the overall market and the technology sector in the United States to fall sharply due to a decline in market valuations.

In 2023, the high level of interest rates in the US market will still drive the rise of the technology sector, fueled by the return of the US dollar and the AI investment boom. However, from a fundamental perspective, the performance of Nasdaq companies has a negative contribution to stock prices. The rise in stock prices mainly comes from the expansion of valuation driven by the AI theme. Comparing 2022 and 2023, the EPS growth rate of Nasdaq is 4%/-6% (Note: the EPS growth rate for the first three quarters in 2023), and the valuation level growth rate is -37% / 33%. In the past twenty years, except for the significant expansion of valuations in the equity market as a whole caused by the Federal Reserve's significant expansion in 2020, there have been few instances of consecutive two years of significant expansion of valuations in the Nasdaq.

Looking ahead to 2024, the continuous expansion of valuations in US technology stocks will face certain pressures. Whether AI can bring substantial revenue and profit contributions to technology companies is expected to become a core factor determining whether US technology stocks can continue to be strong. It expresses optimism about the maturity of AI at the application layer and the landing of edge-side AI terminal hardware. If the application of AI can bring performance contributions similar to those of mobile Internet, US technology stocks are expected to see a sustained rise similar to the period from 2013 to 2015. If the profitability level of AI at the application layer cannot support the return of EPS growth rate to a high level, US technology stocks will face performance pressure from the fundamentals.

The most important investment opportunity for Chinese technology companies in 2024 is AI computing power and cloud computing. In the long term, China is expected to grow more large-cap technology companies.

The training and inference of large AI models have strong demand for computing power. With the continuous maturity of downstream AI products, the global scale of computing power is expected to continue to grow rapidly. On the other hand, the US restrictions on chips to China are becoming stricter, and Chinese computing power chips are forced to seek alternative solutions. Although there are gaps between domestic chip manufacturers and overseas leaders and their industry chains in technology and ecology, they have made positive progress in product development, chip manufacturing, and customer introduction. At the same time, under the development needs of improving the autonomous and controllable core ecosystem of AI servers, domestic CPUs, supporting components, and others are also expected to usher in development opportunities.

長期的観点から言えば、2011年以降、中国の産業のアップグレードとモバイルインターネットの台頭に伴い、情報技術企業のA株市場全体の時価総額比率は4%から16%に急速に上昇しました。一方、S&P500指数全体の情報技術企業の市場総額比率は34%です。中国のIT産業にはまだ成長余地があると予想されます。将来を展望すると、AI産業の急速な進化、中国の技術革新とグローバル産業チェーンへの深い関与により、中国市場で大市場価値を持つIT企業が更に孵化すると期待されます。

投資戦略:

人工知能産業は現在急速に発展しており、基本的な大規模なモデル機能及びその応用は、引き続き迅速に更新されています。翌2024年においても生成型人工知能は、科学技術産業の投資主流とされると予想されます。全世界的には、AIの成長に伴う投資機会が目立っており、国内のアルゴリズム開発企業等も投資対象となるかもしれません。また、クラウドコンピューティング、データ資産、AIアプリケーションにも注目すべきです。アメリカ市場のAI関連企業にも目を向けることをお勧めします。

リスク要因:

AIの核心技術の予想よりも低い開発に関するリスク、科学技術分野の政策監視による制限のリスク、プライベートデータ関連の政策監視のリスク、世界的なマクロ経済成長の予想よりも低いリスク、AIの潜在的な倫理、道徳、プライバシーのリスク、企業データ漏洩や情報セキュリティのリスク、世界的なクラウドコンピューティング市場の予想よりも低い成長リスクや業界競争激化のリスクなどがあります。