- Investment Strategist
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Hong Kong (香港), Individual
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In Part 2 of “Rapid fire questions” on Asia tech, Alistair MacDonald, Investment Strategist, outlines where opportunities and risks are most pronounced.
Q: What are the Asia Technology team’s highest conviction ideas right now?
Beyond the AI supply chain, another key theme in which we are investing is automation and physical AI. Reshoring is driving massive structural demand growth for automation. We're looking at countries such as the US, for example, it lacks the labor – you need robotics for cost efficiency. And then if we look at China, the population is declining by millions of people every single year. If we look at overall robot installations globally, they have doubled in the last decade, and China alone accounts for more than the rest of the world put together. Now you apply AI to this and that turbocharges the demand backdrop. This hugely enhances the capabilities of robotics.
In addition, over time, we anticipate value increasingly accruing to the adopters of AI, not just the enablers. And we see Chinese internet platforms in particular as natural winners in this backdrop. When one looks at the internet platforms in China, these combine many of the US mega-cap businesses within one ecosystem. And so, for example, including large language models, cloud service providers, app distribution and social media, and all of this with an unmatched scale in terms of data and users. Accordingly, integrating AI and distributing it across this vast ecosystem, we think it’s likely to disproportionately benefit these players.
Q: What are the key risks to watch over the next 6-12 months?
While all signs currently point to de-escalation in Iran, if we do see prolonged energy disruption, this could translate eventually into the rationing of energy within Asian economies, with the potential to impact the very power-hungry semiconductor industry. However, the silver lining of that of course is that it would only further deepen the mismatch between supply and demand and translate into ever greater pricing power for these companies.
More broadly, bottlenecks are increasing not just within the semiconductor industry, but also within power generation, labor, land, construction and all of this could translate into an environment in which we simply don't see data centers getting built as quickly as it is currently forecast. But that said, again there is a silver lining and that inherently would limit the risk of an overbuild and excess capacity.
We're a long way from such an outcome at the moment.
The views expressed are those of the speaker at the time of filming. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed.
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