Guangfa Bank Hong Kong: Short-term Volatility Increases in AI Hardware Chain, But Fundamentals Remain Strong

June 16 | Guotai Junan Hong Kong noted the global semiconductor sector has seen a sharp short-term rally, with investor profit-taking potentially triggering swifter rotation. Still, AI infrastructure, rising storage prices, and strong demand for advanced packaging will underpin the tech hardware market. In its June 16 Overseas Technology Monthly Report, analysts led by Jeff Pu pointed out the Philadelphia Semiconductor Index trades at roughly 32x earnings, facing near-term macroeconomic uncertainty and trading congestion. Yet semiconductor and AI fundamentals stay solid, supported by healthy inventories, better-than-expected PC demand, and a rebound in automotive and industrial sector demand. While platforms like Blackwell have cut per-token costs, agent-driven tasks are driving higher token consumption, pushing total AI spending higher, the report noted. Guotai Junan Hong Kong also highlighted that AI model firms like OpenAI and Anthropic boast strong Annual Recurring Revenue (ARR), with early returns on AI investments now emerging, set to fuel continued cloud capital expenditure (capex). The firm projects U.S. top five cloud service providers’ capex will hit $812 billion in 2026—up 82% year-over-year—climbing to $1.053 trillion by 2027. Global AI accelerator market size is forecast to grow from $359 billion in 2026 to $818 billion in 2028. Storage is a top favored theme in the report. Guotai Junan Hong Kong sees NAND outperforming DRAM: NAND integrated prices are projected to rise 25-30% quarter-over-quarter (QoQ) in Q3; DRAM contract prices will climb 15-20%, while HBM pricing is likely to show more flexibility by 2027. On optical communications, the bank argues worries over CPO and HVDC delays are overblown. The report forecasts 800G and 1.6T optical module demand will each hit ~80 million units by 2027, fueled by GPU and ASIC cluster expansions from Nvidia, Google, AWS, and other players. Guotai Junan Hong Kong has added Intel, Credo, Micron, MediaTek, and Marvell to its preferred stock list, while dropping TSMC, AMD, Lumentum, EMC, and Texas Instruments (TI). Overall, the bank holds a "constructive amid volatility" view on the overseas tech sector.