# Big Tech Earnings Kick Off

An episode of [Bloomberg Daybreak: Asia Edition](https://invisiblenetwork.ai/podcast/1663863437), 23 Jul 2026, 22 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/58e85be7-dbb5-4043-afed-af80014dc0b3/3e25b62b-90fa-4783-861c-b4900016366e/audio.mp3?utm_source=Podcast&in_playlist=27143354-63aa-4ac5-965d-af80014dc0d3

Business and finance news from the Asia-Pacific. Alphabet Inc. again raised already sky-high estimates for capital spending in 2026, telling investors that expenses may top $200 billion as it races to build the computing power necessary to fuel its artificial intelligence ambitions. The Google parent projected capital expenditures of $195 billion to $205 billion in 2026, up from a previous estimate of as much as $190 billion, above the roughly $186 billion that analysts had estimated. The higher guidance reflects the company's efforts to accelerate its expansion of AI computing capacity and book more revenue from cloud-computing clients. Tesla Inc.'s profit tumbled despite a strong quarter for its automotive business, pressuring Elon Musk's plan to refocus the electric vehicle maker on artificial intelligence and robots. Spending on the ambitious initiatives surged to $5.8 billion in the second quarter, resulting in Tesla's first cash burn in two years. The company still expects capital expenditures in excess of $25 billion this year, and executives are now predicting even larger outlays going forward. "This is a massive capex year," Musk said late Wednesday on a conference call to discuss quarterly results. "We should be spending on capex as fast as we can — spend as fast as we can without it being too wasteful." We speak to Shay Boloor, Chief Market Strategist. Plus - Asian shares advanced as regional chipmakers gained on expectations they will benefit from billions of dollars flowing into the artificial intelligence buildout. Bloomberg TV hosts Haidi Stroud-Watts and Shery Ahn spoke to Vikas Pershad, Asian Equities Portfolio Manager at M&G Investments. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
[0:09] Speaker 2: Welcome to the Daybreak Asia podcast. I'm Doug Krisner. Equity
[0:13] Speaker 2: trading in the Asia Pacific is being influenced today by
[0:16] Speaker 2: some after the bell earnings in the US, Alphabet among them,
[0:21] Speaker 2: reporting second quarter cloud revenue above expectations. However, at the
[0:25] Speaker 2: same time, Alphabet raised its estimate on cap X by
[0:29] Speaker 2: roughly fifteen billion to as much as two hundred and
[0:32] Speaker 2: five billion for the year. For a closer look, let's
[0:35] Speaker 2: bring in Shai Balor. Shai is chief market strategist at
[0:39] Speaker 2: Futuream Group. Shai is for the moment, based in Seattle.
[0:43] Speaker 2: Thank you for making time. Let's talk about the Alphabet
[0:46] Speaker 2: because I think that what we're going to get here
[0:48] Speaker 2: in terms of reaction in the APEC, particularly among some
[0:52] Speaker 2: of the hardware producers, is going to be driven by
[0:55] Speaker 2: this upward revision in CAPEX for Alphabet. Wouldn't you agree
[0:59] Speaker 2: with that?
[1:00] Speaker 3: Yeah, I think the semis are probably the biggest winners.
[1:02] Speaker 3: I've had to pick a group after this earnings afternoon,
[1:07] Speaker 3: because it wasn't just Google. I mean Tessa also increased
[1:09] Speaker 3: their Capex commentary as well, but on Google specifically, I
[1:13] Speaker 3: mean they Buffler capex to fifteen billion dollars. But they
[1:17] Speaker 3: didn't just stop there, like they also need some comm
[1:19] Speaker 3: tare in twenty twenty seven that they anticipate spending even
[1:22] Speaker 3: more in that year, and even after that it could
[1:26] Speaker 3: extentively grow even faster. And I also think the comm
[1:29] Speaker 3: tair on temporarily renting more expensive instruction from outside providers
[1:33] Speaker 3: because Google cannot build its own capacity fast enough. That
[1:37] Speaker 3: just shows how much of an imbalanced supply and demand
[1:40] Speaker 3: still is at this stage.
[1:42] Speaker 2: So when you mentioned the chip makers and it comes
[1:44] Speaker 2: when it comes to Alphabet, I think of the TPUs,
[1:48] Speaker 2: the tensor processing units. This is a specific chip developed
[1:52] Speaker 2: by Google for certain AI related applications. Does it necessarily
[1:56] Speaker 2: give this TPU give Alphabet a significant edge in what
[2:01] Speaker 2: we're seeing unfold now in the AI landscape.
[2:06] Speaker 3: Yeah, I mean I think you saw it in their
[2:07] Speaker 3: Google Cloud numbers. It's kind of crazy to say at
[2:11] Speaker 3: the scale that Google Cloud's at, but it's growing eighty
[2:15] Speaker 3: two percent top line, and this is now a twenty
[2:17] Speaker 3: five billion dollar business. It's actually becoming twenty percent of
[2:21] Speaker 3: the toll revenue right now, So that segment is just
[2:25] Speaker 3: growing at a rapid pace. I think it's growing several
[2:28] Speaker 3: times as fast as the surf, YouTube and services side
[2:32] Speaker 3: of their business. So I think that that eighty two
[2:35] Speaker 3: percent top line growth combined with thirty six percent operating
[2:37] Speaker 3: margins is showing that this is a real roy like
[2:43] Speaker 3: their ability to control their AI economics because they own
[2:47] Speaker 3: so much of the vertical stack is being proven in
[2:51] Speaker 3: those Google Cloud fundamentals, and I think that it's they
[2:55] Speaker 3: had a very high bar to beat.
[2:57] Speaker 4: I think seventy percent was the wisp on Google Cloud growth.
[3:01] Speaker 3: They came in at eighty two percent, and not just
[3:03] Speaker 3: that margins, the operating incomes tripled year of a year
[3:06] Speaker 3: to an eight point.
[3:07] Speaker 4: Eight billion dollars.
[3:08] Speaker 3: So I think that this is like a rare combination
[3:11] Speaker 3: of top line growth and margin expansion that is just
[3:16] Speaker 3: being proven due to their ability.
[3:18] Speaker 4: Of controlling the chip costs their TPUs.
[3:20] Speaker 3: And even though they're falling behind the benchmarks in the Gemini,
[3:24] Speaker 3: that's totally fine because really the TPU was meant for
[3:28] Speaker 3: internal use. There was a brief period where there was
[3:31] Speaker 3: such an awkward supply demand imbalanced due to the Blackwell delay,
[3:37] Speaker 3: that TPUs were starting to get entertained as an external use.
[3:40] Speaker 3: But really it was supposed to be for internal and
[3:42] Speaker 3: I think that you're showing it in the cloud margins
[3:45] Speaker 3: of how efficient they are operating.
[3:48] Speaker 2: That we also heard from Tesla after the bell second
[3:51] Speaker 2: quarter earning short of the estimate from the street. I
[3:54] Speaker 2: think adjust a DPS around thirty three cents below the
[3:57] Speaker 2: fifty one that analysts had been looking for. There was
[4:00] Speaker 2: a strong quarter of auto sales, but this company is
[4:04] Speaker 2: dealing with some other headwinds right now. What's your feeling
[4:07] Speaker 2: about what Tesla is going through at the moment.
[4:10] Speaker 3: Yeah, I mean Taesla delivered by Quarda looked excellent, like
[4:13] Speaker 3: you mentioned, on revenue deliveries, but it was substantially weaker
[4:17] Speaker 3: on the automotive profitability. I mean, they clearly sacrificed a
[4:21] Speaker 3: lot of their margins in order to fulfill that delivery
[4:24] Speaker 3: number or be on the revenue number. I also think
[4:27] Speaker 3: that their energy margins was a bit of a disappointment
[4:29] Speaker 3: as well because of a couple one off situations that occurred.
[4:33] Speaker 3: But my main takeaway from Tesla is obviously their quarter
[4:37] Speaker 3: contained two very different stories. I think the automotive business
[4:40] Speaker 3: is producing a lot stronger demand, which is great to see,
[4:43] Speaker 3: but really disappointing margins. The long term autonomy piece is
[4:48] Speaker 3: actually receiving a lot more of its commercial signals that
[4:52] Speaker 3: I was surprised to hear on the conference call through
[4:54] Speaker 3: accelering FSC adoption and some timelines that looked a little
[4:59] Speaker 3: more near term in the long term, but the automotive
[5:02] Speaker 3: gross margins, if you exclude the regulatory credits, like, that's
[5:06] Speaker 3: the reason why the stock is down after after hours
[5:10] Speaker 3: right now, it's down four percent. It's just they're sacrificing
[5:12] Speaker 3: a lot to hit those delivery numbers. And I think
[5:15] Speaker 3: they're doing so because they're seeing the adoption FSD hit
[5:19] Speaker 3: fifty five percent and they want to sacrifice the near
[5:22] Speaker 3: term margins in order to get that software margin the
[5:25] Speaker 3: FSD side of the business.
[5:27] Speaker 2: So how is this company now focused on the Chinese market,
[5:30] Speaker 2: which for a while there I think was critical. It
[5:33] Speaker 2: seems far less critical these days, and we know what
[5:36] Speaker 2: the ev story is in China and how dominant Chinese
[5:39] Speaker 2: players have become in the industry. Has Tesla kind of
[5:43] Speaker 2: relaxed its position a bit when it comes to China.
[5:47] Speaker 4: Totally?
[5:48] Speaker 3: Has I think they wave the white flag on China.
[5:50] Speaker 3: I really don't think it's really a topic of conversation anymore.
[5:54] Speaker 3: In the internal circle of Tessa. I think that they're
[5:57] Speaker 3: clearly all about Robotaxi.
[6:01] Speaker 4: Humanoid.
[6:01] Speaker 3: It's like going from that slow then fast rollout of
[6:05] Speaker 3: cybercab like energy business China. They're just like they think
[6:09] Speaker 3: it's a secondary market that is just lost already due
[6:13] Speaker 3: to the Chinese competitors that are just absolutely killing on
[6:16] Speaker 3: that front, and they just think it's a bit of
[6:19] Speaker 3: a loss, cause I don't think it's at all on
[6:22] Speaker 3: top of conversations in the internal Tessa circle.
[6:25] Speaker 2: So we also heard from IBM after the belt things
[6:28] Speaker 2: weren't not really that surprising because we had the preliminary
[6:31] Speaker 2: results last week that indicated week sales for both infrastructure
[6:35] Speaker 2: and software, and a lot of people were a little
[6:38] Speaker 2: alarmed by that as maybe an indication that AI is
[6:42] Speaker 2: the bigger issue right now and IBM has been left
[6:45] Speaker 2: out of that story. The stock was down on that
[6:48] Speaker 2: news last week about twenty five percent. When the preliminary
[6:51] Speaker 2: numbers were released today, it seemed to confirm everything that
[6:55] Speaker 2: we learned last week. Where are you in understanding the
[6:59] Speaker 2: mainframe business and whether or not it's even relevant these days.
[7:03] Speaker 4: It's still somewhat, it's still relevant. I do believe that.
[7:08] Speaker 3: The issued IBM was more of us expectations. I think
[7:12] Speaker 3: entering the preliminary guidance that they revealed like a week ago,
[7:16] Speaker 3: like the stock did run up significantly. I think that
[7:19] Speaker 3: there was maybe some commentary that Anthropic is going to
[7:25] Speaker 3: become some kind of somewhat of a tailwind for red Hat.
[7:27] Speaker 3: I think there was even some commentary today that the
[7:30] Speaker 3: CEO mentioned that it would be like a ten billion
[7:32] Speaker 3: AR tam.
[7:33] Speaker 4: For red Hat.
[7:34] Speaker 3: So like the software side of the business for IBM,
[7:36] Speaker 3: shit in theory experienced talent from AI, and there was
[7:40] Speaker 3: somewhat of a bump in the stock price heading into
[7:42] Speaker 3: those prints in anticipation that there was going to be
[7:44] Speaker 3: some kind of AI beneficiary stance, but clearly that wasn't
[7:49] Speaker 3: the case. I think that you're seeing that there was
[7:52] Speaker 3: an execution myss on the management front at IBM.
[7:54] Speaker 4: They are very upfront about that.
[7:56] Speaker 3: I think that they're going to there experiencing a couple
[8:00] Speaker 3: of headwinds that are laid in the second quarter that
[8:02] Speaker 3: they're going to focus on how to get ahead of
[8:05] Speaker 3: in the following quarters. But end of the day, like
[8:09] Speaker 3: this is a stock that just has an absolute place
[8:12] Speaker 3: in the enterprise world. It's just the stock got ahead
[8:15] Speaker 3: of itself, and I think that their guidance had to
[8:17] Speaker 3: get taken down a bit. And you're seeing it wasn't
[8:20] Speaker 3: really an enterprise issue because Service Now had a really
[8:23] Speaker 3: strong earnings report today, So this does feel like an
[8:27] Speaker 3: IBM specific issue. And if software can go back to
[8:30] Speaker 3: growing ten percent, I think that'll be fine. It's just
[8:34] Speaker 3: management even today talked about that software revenues and grows
[8:37] Speaker 3: seven percent and twenty twenty six due to several delayed
[8:40] Speaker 3: software deals. Well, it's from what we're hearing, everything right
[8:45] Speaker 3: now is going towards either these frontier models or cybersecurity.
[8:50] Speaker 3: So I think that's there's only a finite amount of
[8:52] Speaker 3: dollars that can actually be spent on these IT budgets,
[8:56] Speaker 3: and unfortunately IBM is part of the bucket where it's
[8:59] Speaker 3: not as essential as the cybersecurity in frontier spendings.
[9:03] Speaker 2: Well, what about what we've been hearing from IBM regarding
[9:05] Speaker 2: quantum computing? Is it far too early right now to
[9:09] Speaker 2: make that bed in quantum computing?
[9:12] Speaker 3: Oh, this is not this decade thing in quantum I
[9:15] Speaker 3: think quantum is going to be a twenty thirty plus thing.
[9:17] Speaker 3: I think that you're going to see sovereign spend going
[9:23] Speaker 3: towards the space. I think that's that's going to create
[9:26] Speaker 3: this illusion that it's commercially ready due to these like
[9:32] Speaker 3: a lot of these calm chair and headlines on national
[9:34] Speaker 3: spending towards quantum due to security fronts or a lot
[9:37] Speaker 3: of this like research and development's happening in quantum. But
[9:40] Speaker 3: the commercial fronts on quantum will not be until at
[9:43] Speaker 3: least twenty thirty. We're just nowhere close to that. Even then,
[9:46] Speaker 3: it's going to be an incremental thing on workloads. It's
[9:49] Speaker 3: not going to be a replacement towards AI. I just
[9:52] Speaker 3: think that right now it's purely a sovereign spend angle.
[9:56] Speaker 4: That is fine.
[9:56] Speaker 3: I mean, the peer plays, like the ion Cues of
[9:58] Speaker 3: the world, they're going to do just because they have
[10:00] Speaker 3: a smaller base, the ray of change will be more
[10:03] Speaker 3: exponential for them due to this national spending foreign sovereignty defense.
[10:08] Speaker 3: But for an IBM or Google, even a Microsoft, it's
[10:11] Speaker 3: not going to be a need to mover for a decade.
[10:13] Speaker 2: Shy, Before I let you go, I want to get
[10:15] Speaker 2: your take on what you've heard from China regarding Moonshot,
[10:19] Speaker 2: This new AI model Kimmy K three seemed to rattle
[10:23] Speaker 2: the market quite a bit. It seems like a low
[10:25] Speaker 2: cost solution to the world of large language models. Does
[10:30] Speaker 2: it represent risks to companies like let's say Open AI
[10:34] Speaker 2: or Anthropic.
[10:36] Speaker 4: Yes, both of those absolutely. I believe so.
[10:39] Speaker 3: And I think that's great for the AI economy, bad
[10:42] Speaker 3: for those two duoplies on the model fronts, because I
[10:46] Speaker 3: think that right now they have a great They're obviously
[10:48] Speaker 3: have a ton of mind share and a great first
[10:50] Speaker 3: mover advantage. But I think you're seeing signs that there's
[10:54] Speaker 3: going to be a lot of creative ways to get
[10:57] Speaker 3: around the duopli bottlen that those two companies have, and
[11:01] Speaker 3: I think that that's going to be great for everyone
[11:04] Speaker 3: else because I think the clearest sign and that to
[11:06] Speaker 3: me after this Kimmy K three revelation, is that they
[11:11] Speaker 3: are computes constrain even right now. And I think that
[11:14] Speaker 3: it's really interesting that they're compete constraint right now because
[11:18] Speaker 3: Kimmy K three has already been trained, So the ball
[11:21] Speaker 3: next now peering when the companies try to serve the
[11:23] Speaker 3: model to users. At scale rather than while it's trying
[11:26] Speaker 3: to build that model. So that to me is like
[11:28] Speaker 3: the clearest signal that the next phase of the AI
[11:32] Speaker 3: cycle is going to be like driven by less number
[11:34] Speaker 3: of companies and more on like dozens thousands of other
[11:39] Speaker 3: companies that are going to be requesting more billions of
[11:42] Speaker 3: daily requests flowing through those models instead of just everything
[11:46] Speaker 3: going through these two models. So I think bad for
[11:48] Speaker 3: those two companies, but great for AI infrastructure companies.
[11:51] Speaker 2: All right, Chi, well leave it there, Thank you so
[11:52] Speaker 2: very much. Shaibalu Or is a chief market strategistic Future
[11:56] Speaker 2: and group joining from Seattle here on the Daybreak Asia podcast.
[12:06] Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Derek Prisner.
[12:09] Speaker 2: Semiconductor related stocks in the Asia Pacific or trading higher.
[12:13] Speaker 2: That's after Alphabet raised its estimate on capital spending, and
[12:17] Speaker 2: that's where we begin our conversation with Vikas. Pershad Vicos
[12:22] Speaker 2: is Asian equities portfolio manager at MNG Investments. He spoke
[12:26] Speaker 2: with Bloomberg TV host Sherry On and Heidi Stroud Watts.
[12:30] Speaker 5: We have a very.
[12:31] Speaker 1: Nuanced AI trade right now coming from the US. Right
[12:34] Speaker 1: when it comes to Alphabet, we saw this major cloud beat,
[12:36] Speaker 1: we had Tesla disappointing, we had IBM cutting guidance. How
[12:40] Speaker 1: does that necessarily translate into the Asian trade?
[12:45] Speaker 6: I'm warning Shoy it's a good place to start. There
[12:48] Speaker 6: are a few takeaways from the Google announcements. For me,
[12:51] Speaker 6: The first one is that the increase in capex should
[12:55] Speaker 6: come as a surprise. But for those who are expecting
[12:58] Speaker 6: the seven hundred and fifty billion dollars to grow perhaps
[13:00] Speaker 6: to a trillion dollars from the big five spenders in
[13:03] Speaker 6: the US for calendar twenty seven or maybe even early
[13:06] Speaker 6: twenty eight on a twelve month view, we're probably not
[13:08] Speaker 6: heading towards that number yet. That's number one. Second, we've
[13:11] Speaker 6: been investing not directly in the pix and shovels of
[13:14] Speaker 6: the AI trade this year, but the pixe and shovels
[13:16] Speaker 6: of those picton shovels. So what does that mean is
[13:18] Speaker 6: that we're looking for beneficiaries or companies that will benefit
[13:23] Speaker 6: even if the overall hyperscalar CAPEX pool doesn't grow very much.
[13:26] Speaker 6: So optical networking company, photonics based companies, some of the
[13:29] Speaker 6: advanced packaging companies. The underlying shifts and technology underway that's
[13:34] Speaker 6: what we're looking for in Asia. There are plenty of
[13:35] Speaker 6: opportunities still at this stage of the AI trade that
[13:39] Speaker 6: we've seen over the past four years. Also, what I
[13:41] Speaker 6: would say is that there's a lot of noise these days,
[13:43] Speaker 6: but if you look back, let's say you go back
[13:46] Speaker 6: to the April of last year when we had the
[13:47] Speaker 6: Trump tariffs released across the world, there have been a
[13:53] Speaker 6: few genuine signals. One of the real signals in recent
[13:57] Speaker 6: months was last week or over the weekend. With the
[14:00] Speaker 6: three model, our view is that there's going to be
[14:02] Speaker 6: a divergence between compute and memory demand. Computer is going
[14:05] Speaker 6: to become more efficient, and so we're revisiting our holdings
[14:09] Speaker 6: in the memory sector where we had been quite overweight
[14:12] Speaker 6: last year. We have been overweight in more recent months,
[14:15] Speaker 6: but we were revisiting that. So a lot to look
[14:17] Speaker 6: at in Asia. But I would say that the overall
[14:20] Speaker 6: takeaway is that we might see a deceleration in AI capecks,
[14:25] Speaker 6: hyperscaler capex, but that doesn't change the opportunity set for
[14:29] Speaker 6: long term active managers.
[14:31] Speaker 1: Yeah, it's very layered and nuanced to what you're saying
[14:34] Speaker 1: right now. Right, I mean, if we see a slowdown
[14:36] Speaker 1: because of what's happening across China. You will revisit memory,
[14:39] Speaker 1: but at the same time you're actually investing in the
[14:41] Speaker 1: picks and shovels of the picks and shovels. So for
[14:46] Speaker 1: investors who want to sort of unpack this, are there
[14:49] Speaker 1: any regions or markets where you would find more opportunities
[14:54] Speaker 1: And when it comes to future investments, would you go
[14:57] Speaker 1: into the Chinese tech sector itself as well, despite, of course,
[15:01] Speaker 1: some of the more fundamental issues with that economy.
[15:07] Speaker 5: Yes.
[15:07] Speaker 6: So to answer your last question first, whether an investor
[15:10] Speaker 6: is looking to allocate more capital to AI and tech
[15:13] Speaker 6: and hardware or just the economy, the companies of the future,
[15:18] Speaker 6: or if you just want to understand what's happening in
[15:19] Speaker 6: the world. I do think that you need to start
[15:21] Speaker 6: with China. The center of gravity of AI has already
[15:25] Speaker 6: been shifting towards Asia over the past few years. That
[15:28] Speaker 6: shift is accelerating, and it's moving from hardware and memory
[15:32] Speaker 6: to now the models themselves. If you look at the
[15:34] Speaker 6: recent announcements a recent being over the past year or so,
[15:38] Speaker 6: first from deep Seek in January February last year, and
[15:41] Speaker 6: now from Moonshot just a few days ago. The pace
[15:45] Speaker 6: of the acceleration in Chinese tech development is astonishing and
[15:48] Speaker 6: that will have implications for all the sectors that that touches.
[15:52] Speaker 6: So yes, we're spending more time in rellocating more capital
[15:54] Speaker 6: to accelerators GPU accelerators in China, to the semiconductor production
[16:00] Speaker 6: equipment companies in China. And also all this capital location
[16:04] Speaker 6: and the time and the research spent on China is
[16:07] Speaker 6: yielding a lot of learnings for Japanese companies, for Taiwanese
[16:10] Speaker 6: and Korean companies, many of whom are now more vulnerable
[16:14] Speaker 6: than they have been in the past. So there is
[16:16] Speaker 6: a shift underway in our portfolio, is a little bit
[16:18] Speaker 6: more caution on some of the North Asian names outside
[16:21] Speaker 6: of China, and more constructive views on China. Despite the
[16:25] Speaker 6: headline top down slowdown that we are seeing, there's a
[16:29] Speaker 6: very broad opportunity set in China and it's not just
[16:31] Speaker 6: about Ai. Same thing goes for other markets Japan. We
[16:35] Speaker 6: remain very constructive. Even though we're more than a decade
[16:38] Speaker 6: past the launch of Abbi's arrows. This might be the
[16:41] Speaker 6: most slowly reprising equity story in the world. The corporate
[16:44] Speaker 6: governance transformation in Japan if we look at India, some
[16:47] Speaker 6: stability in Q two after one of the worst quarters
[16:50] Speaker 6: for Indian equities in Q one, and there's a lot
[16:52] Speaker 6: to like in India as well. Seven thousand listed companies,
[16:54] Speaker 6: almost two thousand with a market cap over one hundred
[16:56] Speaker 6: million dollars. Every sector you can imagine is listed in India.
[17:00] Speaker 6: So the big three markets in Asia remain very exciting
[17:02] Speaker 6: for us. If we've taken some capital away in recent
[17:05] Speaker 6: weeks and months, it's been from to the other large
[17:09] Speaker 6: markets in North Asia, that's Taiwan and South Korea.
[17:13] Speaker 5: Because do you think there's now a tech stock put
[17:15] Speaker 5: in China with the national team returning with intervention.
[17:21] Speaker 6: It's a fair question. I would err on the side
[17:24] Speaker 6: of saying yes. And so when we look at valuations
[17:28] Speaker 6: in China, why are they so much higher now than
[17:30] Speaker 6: they have been in recent years. It's because of the
[17:32] Speaker 6: acceleration and tech spending. It's the acceleration of the progress
[17:35] Speaker 6: that we're seeing. Coming into this year, the expectations for
[17:39] Speaker 6: w wafer fab equipment expenditures was seen to be about
[17:45] Speaker 6: one hundred and twenty billion dollars with flatish growth or
[17:49] Speaker 6: limited growth in China six months into the year, we're
[17:53] Speaker 6: seeing very significant increases to those estimates overall, but especially
[17:57] Speaker 6: so in China. And so this is why the premium
[18:00] Speaker 6: are expanding for Chinese companies. But it's not just scarcity premium.
[18:04] Speaker 6: These companies are doing well. They're taking shared the Japanese
[18:07] Speaker 6: and Taiwanese and Korean companies that we speak to, whether
[18:09] Speaker 6: they are wayfer companies, spe companies, even memory companies now
[18:13] Speaker 6: acknowledge that there are vulnerabilities in their business models on
[18:18] Speaker 6: a longer term view, whether it's DM HBM or conventional
[18:21] Speaker 6: memory or nand or the etching and deposition equipment in
[18:26] Speaker 6: which the Japanese and the American companies have been leaders
[18:28] Speaker 6: for a long time. So yes, start with China, spend
[18:31] Speaker 6: time there, understand what's going on. And again it's not
[18:34] Speaker 6: just Ai. Pretty much anything that is happening within China
[18:38] Speaker 6: is touching sectors that has happened sectors outside of China,
[18:41] Speaker 6: whether you look at healthcare, pharma and biotech, defense, aerospace,
[18:45] Speaker 6: and then of course autos, ancillaries, renewables, the list is very,
[18:49] Speaker 6: very long.
[18:51] Speaker 5: I guess the question is when it comes to the
[18:53] Speaker 5: broader landscape for Chinese equities, it's helpful to have national
[18:58] Speaker 5: policy support right, and of course national AI ambitions as well,
[19:01] Speaker 5: But do you require a strong economic fundamental situation which
[19:06] Speaker 5: perhaps hasn't come through yet with the recent slowdown.
[19:12] Speaker 6: It wouldn't hurt. But if you look at our China
[19:15] Speaker 6: strategies and our portfolios in China, the top holdings are
[19:19] Speaker 6: not AI related companies. It's a very broad opportunity set
[19:23] Speaker 6: that we're seeing. We're seeing single digpees, double digit free
[19:26] Speaker 6: cash flow yields, high and rising dividend yields, reasonable earnings growth,
[19:32] Speaker 6: very smart capital allocation, much smarter than than we've seen
[19:35] Speaker 6: over the past five, ten, fifteen, twenty years. And so
[19:38] Speaker 6: our portfolio in China, the largest exposures are in banks,
[19:42] Speaker 6: in shipbuilders, in some of the retailers. Yes, of course
[19:45] Speaker 6: we do have exposure to tech tech hardware, and we're
[19:48] Speaker 6: doing our work on a broader universe of names as well.
[19:51] Speaker 6: But the opportunity to set again in China is very
[19:53] Speaker 6: broad for long term active managers. This is the right
[19:56] Speaker 6: time to look at China. If you look at China's
[19:58] Speaker 6: contribution to global trade and the global economy on one side,
[20:02] Speaker 6: there's a material dislocation between that and the allocation global
[20:08] Speaker 6: to Chinese equities in global portfolios, and we think that
[20:12] Speaker 6: that should normalize over time, and if it doesn't, it
[20:14] Speaker 6: just extends the opportunity set for long term managers like us.
[20:19] Speaker 1: Because before we let you go just super quickly, I
[20:21] Speaker 1: wanted your take on what we're seeing from the BOJ
[20:24] Speaker 1: sources selling Bloomberg that they could actually consider going even
[20:28] Speaker 1: at a faster rate when paced when hiking rates. Would
[20:32] Speaker 1: that alter your investment case for Japan?
[20:38] Speaker 6: Not really. We've seen the end go from one hundred
[20:41] Speaker 6: or actually around the time of Abbe's eras being launched
[20:44] Speaker 6: around eighty to now one sixty. We don't share, as
[20:48] Speaker 6: you know, we don't invest in the market. We invest
[20:50] Speaker 6: in stocks. We're not ignorant of the macro. At the margin.
[20:53] Speaker 6: It might impact how we see some of the exporters perhaps,
[20:56] Speaker 6: but our view is if you do your homework and
[20:58] Speaker 6: you bet on the right management teams with the right
[20:59] Speaker 6: business man in the right unit economics, you'll win over time.
[21:02] Speaker 6: But as you mentioning just before I came on on air,
[21:06] Speaker 6: there is a credibility question, so we'll see how the
[21:08] Speaker 6: market perceives this. They're being transparent. The headlines are out there,
[21:12] Speaker 6: but the end continues to weekend, so we do have
[21:14] Speaker 6: an eye on that, but it does not change our
[21:16] Speaker 6: long term enthusiasm for Japanese equities.
[21:18] Speaker 2: That was Vikas Pershad Asian Equities portfolio manager at m
[21:22] Speaker 2: ANDNG Investments, speaking earlier with Bloomberg TV host Sherry On
[21:26] Speaker 2: and Heidi Stroud Watts, bringing you their conversation here on
[21:29] Speaker 2: the Daybreak Asia Podcast. Thanks for listening to today's episode
[21:35] Speaker 2: of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we
[21:40] Speaker 2: look at the story shaping markets, finance, and geopolitics in
[21:43] Speaker 2: the Asia Pacific. You can find us on Apple, Spotify,
[21:47] Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.
[21:51] Speaker 2: Join us again tomorrow for insight on the market moves
[21:54] Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisoner
[21:58] Speaker 2: and this is bloomb

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