"U.S. tech companies are extremely innovative, and what Apple and Microsoft are doing now is not the same as what they did two decades ago."
On May 31, Huabao Fund hosted the "Technology Frenzy Stops? Tapping the Growth Potential Under the "Technological Singularity", Zhou Jing, general manager of the international business department of Huabao Fund, replied when asked why American technology giants have been able to maintain such strong growth momentum.
Since the beginning of this year, this AI boom set off by ChatGPT has swept the world, and technology stocks have led the way.
This "disruptive innovation" that began overseas has opened a melee between domestic and foreign manufacturers in the "gladiatorial arena" of artificial intelligence.
As major models have landed, NVIDIA, which sells "shovels", has shown a very bright "report card", adding another fire to the already hot market.
In the words of Zhao Qiyuan, assistant fund manager of the international business department of Huabao Fund, "After ChatGPT came out, from the beginning of the year to now, everyone thought it was a concept or a model, but to the computing power, the performance was really realized." ”
From the general trend, the demand for artificial intelligence for computing power, cloud, and chips is beyond expectations.
Combined with the current macro environment, Zhou Jing analyzed that long-term inflation has steadily declined, interest rates have fallen, short-term banking risks and U.S. bond risks are gradually alleviating, and will continue to develop in the direction of the U.S. stock technology sector.
For the U.S. technology sector, valuations benefit from the favorable repair of the macro environment, and the fundamentals are favorable compared to other industries, and it is expected to usher in a double rise in Davis.
In the exchange, Zhao Qiyuan also sorted out in detail the subdivisions in the pan-technology sector, as well as the development rhythm of artificial intelligence-related industries at home and abroad.
In summary, China is still application-oriented, and the overall trend is to develop in the order of front-end applications, models, clouds, and then upstream hardware and servers.
In addition, Li Kaiying, a public fund research expert of Huatai Securities, and Zhou Jing and Zhao Qiyuan of Huabao Fund also had in-depth discussions on topics such as "disruptive innovation" in the field of science and technology.
The macro environment continues to develop in a positive direction for the US stock technology sector
Li Kaiying: First of all, let's review the recent performance of overseas markets?
Zhou Jing: From the current point of view, the annualized inflation rate in the United States has fallen to 4.9%, and from the perspective of inflation classification, commodity inflation has basically been fought through the Fed's monetary policy, mainly service-oriented inflation, which is still high.
Service-oriented inflation is more related to the US demographic structure and the excess reserves after the epidemic in the United States.
Overall, inflation should fall this year should be a high probability event, but whether it can go to the 2% that the Fed has been emphasizing is doubtful, and it may only reach 3% by the end of the year.
But as long as there is no continued interest rate hike at the beginning of the year, it is still a relatively big plus for the US stock market.
Therefore, since November last year, when the Fed's tone loosened slightly, the US stock market has seen a relatively large rebound.
This rebound began to decline in February and March this year, and there was a technological revolution represented by ChatGPT, which led to the rise of US technology stocks.
Overall, there is no doubt about the rate hike at present, it is possible that May is the last rate hike, and the possibility of raising interest rates in June is possible, but it is unlikely.
Inflation going down is a high probability, there will be a repeat in the middle, but the speed of the fall will have a certain deviation, and the overall downward trend is irreversible.
As for recession, it cannot be said that the United States will enter a recession this year.
Because there were three large-scale additional currency issuances during the epidemic in the United States, many currencies actually formed residents' excess savings, and this excess savings is likely to be exhausted by November this year.
The United States is a consumption-driven country, as long as the excess reserves have not been exhausted, consumption is still relatively strong, and it is more difficult to enter a recession, so the question of whether to enter a recession has to look back.
For the U.S. technology sector, valuations benefit from the favorable repair of the macro environment, and the fundamentals are favorable compared to other industries, and it is expected to usher in a double rise in Davis.
From the current macro environment, on the one hand, long-term interest rates have fallen, and the valuation of the US technology sector has been repaired.
On the other hand, the improvement of short-term risk aversion and the increase in risk appetite also supported the valuation level of the US technology sector.
At the same time, although the fundamentals of the United States have been in a downward cycle since the beginning of this year, the fundamentals of the US stock technology sector represented by AI are expected to buck the upward trend.
Zhao Qiyuan: I will mainly talk about the performance of overseas technology, as a whole, the NASDAQ index has risen by 24%, and the top leading stocks will perform better.
In January, the market sentiment was actually very sluggish, and in December last year, because of taxes, the US stock market had a more serious book loss at that time, and under such circumstances, the interest rate on government bonds was falling, so the market eased, which caused the Nasdaq to rise more in January.
In mid-to-early February, U.S. employment rebounded a little bit, and everyone was worried about rising inflation, so the interest rate on Treasury bonds at that time was up, and the NASDAQ fell by about 10%.
But then the earnings season in February and March performed very well, because last year's earnings of these big technology stocks were less than expected, so compared to the fourth quarter of last year, everyone's expectations are relatively low.
In this situation, the big technology stocks are doing very well and the cash flow is so good that 780% of the technology stocks are exceeding expectations, so the Nasdaq is doing well.
There was a Silicon Valley bank incident in March and April, a credit crunch, and everyone had some concerns about growth, so the whole cycle was not good, but the quality of technology companies was very good, and the cash flow was very strong, so in March and April technology stocks were very strong.
Since May, artificial intelligence has driven the growth of chip companies and server companies, which is particularly positive for performance, so the seller has upgraded the ratings of these technology companies, and these technology stocks have also performed well since May.
The pan-technology sector has its own focus
Li Kaiying: After talking about the market, officially open the topic of science and technology focus, what are the subdivisions of the technology sector, what are the different emphases between them, can you sort it out?
Zhao Qiyuan: The technology sector is mainly divided into three traditional sectors, software services, hardware, and semiconductors.
Software is mainly operating systems, application software, streaming media, e-commerce, are some traditional big blue chip technology companies.
Hardware includes manufacturers of personal computers, mobile phones, servers, and hardware equipment manufacturers.
Semiconductors are divided into chips, such as CPUs, GPUs, memory chips, and design companies; and some equipment foundries, including fabs and so on.
The recent hot AR, VR, virtual reality, and artificial intelligence are actually a subdivision of various high-tech sectors that are integrated.
Now the focus of the artificial intelligence theme, software is based on this SaaS, which is subscribed by enterprises and individuals, and is related to the cycle of consumption, including the capital expenditure cycle of enterprises.
Hardware includes personal computers and mobile phones, which are related to the cycle of consumer replacement.
Semiconductors are based on the performance of cloud data centers, thereby driving sales, and the recent market can be said to be artificial intelligence driving the supply of servers, accelerators, and chips, so production capacity can not keep up, and foundry is needed.
Zhou Jing: Let me add the difference between US stocks, A shares and Hong Kong stocks.
In fact, the technology sector of Hong Kong stocks is not complete, especially Hang Seng Technology, which is mainly composed of some Internet companies, and Internet companies are only a small part of the pan-technology sector.
On the whole, the A-share pan-technology sector covers a relatively complete range, but there are more hardware and software companies in A-shares, and some service companies choose to list on US stocks or Hong Kong stocks.
Therefore, A-shares plus Hong Kong stocks, as well as some Chinese concept stocks listed in the United States, represent a relatively comprehensive pan-technology theme.
As for U.S. stocks, they are themselves pan-technology sectors and are very complete.
"Innovation + commercialization" is the most important reason for the success of American technology giants
Li Kaiying: From the perspective of the US stock industry ecology, why can these technology giants maintain such strong growth momentum?
Zhou Jing: American technology companies are very innovative, and what Apple and Microsoft are doing now is not the same as what they did twenty years ago.
In the field of science and technology, from 0 to 1, it is basically achieved by the United States, and from 1 to n, each country has its own representative company.
The reason why from 0 to 1 is to be done by the United States, in fact, it is related to the venture capital culture in the United States, the United States is basically the most prosperous country for VCs, they have a lot of funds to help start-up companies to grow, and the United States itself has many strong scientific research institutions, with a relatively strong spirit of innovation.
Therefore, these technology companies in the United States can often do from 0 to 1, and from 1 to n, we can see that there will be some business geniuses, such as Microsoft's Bill Gates, Tesla's Musk, Apple's Jobs.
These people can turn scientific research into very good business models.
In summary, "innovation + commercialization" is the main reason for the success of these American technology giants.
Zhao Qiyuan: I think the main reason is that its technological advantages have always been online, and we can see that Silicon Valley invests a huge amount in research and development every year.
With the support of good talents and good funds, coupled with the help of VC and capital markets, the development is very orderly.
So in the past, U.S. companies were leaders in many areas, and they were very advantageous from the point of view of basic elements.
From front-end applications, models, and clouds to upstream hardware and servers
Li Kaiying: In the A-share market, AI-related investment tools and financial products have been issued a few years ago, but they have really received widespread attention from investors, almost since this year, that is, driven by ChatGPT.
Overseas, as an investment theme, what is the difference between the attention and development pace of AI-related industries and those in China?
Qiyuan Zhao: From ChatGPT and OpenAI to Microsoft's Bing and Google's PaLM 2, the focus is mainly on applications and models.
So when the first wave of attention to ChatGPT and OpenAI, it was Microsoft that rose more sharply, Google came out late, and there were some oolong events at the press conference, and the market did not have so much confidence in its artificial intelligence.
On the whole, first the application and the large model, and then began to rise the cloud, after the cloud rose, NVIDIA's financial report exceeded expectations to make everyone understand that this is not just the focus of hype, and there is cash in performance.
It is precisely because the application of artificial intelligence is very extensive, resulting in the scarcity of computing power, so everyone has purchased more cloud orders, ordered more GPUs, server chips, including managed switches, accelerators, etc., so companies such as NVIDIA are going up.
Overall, its trend is from front-end applications, models, clouds, and then to upstream hardware and servers.
The main domestic is also applications, starting from Baidu's Wenxin, and then some industrial chains of artificial intelligence, such as many high-end manufacturing, chips, optical modules and so on.
These overseas connections are actually very close, including everyone's expectations for NVIDIA's financial reports are very high, coupled with the release of new products, everyone will pay attention to how much the optical module on NVIDIA's new supercomputing platform has grown, and which A-share companies produce multi-modules.
From the trend point of view, the two sides are relatively similar, and the overseas boom will also be transmitted to the domestic industrial chain.
Zhou Jing: At present, domestic words are more on the application side.
What can bring great changes to human society is "disruptive innovation"
Li Kaiying: How do you understand the term "disruptive innovation"?
Zhou Jing: The term disruptive innovation was proposed by Cathie Wood, chief investment officer of Ark Investment, mainly to say that disruptive innovation can bring great changes to human society, greatly improve the current productivity of human beings, or greatly reduce production costs, resulting in huge changes in the production mode of the entire industry and even all mankind.
There are not many such innovations in human history, such as the steam engine in the era of the industrial revolution and the Internet around 2000, which can be called disruptive innovation.
Qiyuan Zhao: Let's summarize what disruptive innovations have emerged in the past decade.
First, electric vehicles and energy storage, when Tesla launched electric vehicles, its vision was to hope that electric vehicles would become the main force in the automotive industry.
Under this vision, the market share and penetration rate of domestic electric vehicles are rising.
Second, is the payment system, foreign countries are not as advanced as domestic, our Alipay, WeChat payment, has been very popular.
The payment system in the United States is very mature, and the credit card system has been maintained for decades, in this case, electronic payment is also a subversion of an industry.
Third, space exploration, there are many entrepreneurs who will develop space exploration. Their greatest vision is to lay the foundation for space in their lifetimes.
Going into space or flying out of space is also a very disruptive innovation for mankind.
There are also gene sequencing robots and so on, as well as some disruptive innovations in finance, education, shipping.
So "disruptive innovation" is not a simple word, and the impact on humanity can be seen from these industries is very profound.
The demand for artificial intelligence for computing power, cloud, and chips is beyond expectations
Li Kaiying: Chip concept stocks have risen recently, how do you think about the performance of chip stocks in the domestic and foreign markets, will there be any difference?
Zhao Qiyuan: Last week, NVIDIA's expectations for the second quarter earnings were raised, and the increase was particularly large, exceeding the estimates of all Wall Street analysts, from which it is obvious that the demand for computing power in artificial intelligence is very large, and the demand for computing power was a little underestimated before.
In this case, the chip sector at home and abroad has a relatively good rise, but after that, it still depends on the fulfillment of performance.
After ChatGPT came out, from the beginning of the year to now, everyone thought it was a concept or a model, but to the computing power, the performance was really realized.
However, this performance is also difficult to grasp, and everyone did not foresee that the upward adjustment would be so large, resulting in NVIDIA's market value once exceeding $1 trillion.
For the understanding of the demand for computing power and chips, investors need to spend more time studying this matter, but from the general trend, the demand for artificial intelligence for computing power, cloud, and chips is beyond expectations.
In this case, I am optimistic about the performance of chips at home and abroad, especially artificial intelligence chips, server chips, and GPU-related industries.
Li Kaiying: As the largest country in chip use, does China have any latecomer advantages in domestic substitution? Where is the point of disruptive innovation in the future of chips?
Zhao Qiyuan: Before this matter came out, the traditional chip was nothing more than a functional change such as GPU and CPU, but now the change in the demand for the cloud by artificial intelligence is similar to the thing Tesla is developing self-driving chips.
Tesla used Nvidia before, but Tesla found that it could develop its own FSD chip that was more suitable for this scenario.
Artificial intelligence will develop later, it is likely that just like electric vehicles, the design of chips will go in a particularly professional direction, because the amount of the entire industrial chain is very amazing. In this context, support you to do the design and development of various tape-outs and chips.
Investors who invest in "disruptive innovation" have a higher risk appetite
Li Kaiying: From an investment perspective, what is the difference between the NASDAQ 100 index and the disruptive companies we are talking about today, and what kind of investors are they suitable for?
Zhou Jing: If it is a long-term and relatively stable investment, the NASDAQ 100 is more suitable.
And disruptive innovation, because it is to invest in the vision of VC, volatility will definitely be greater than the NASDAQ 100, and the company selected is very different from the NASDAQ 100, because many of the NASDAQ 100 are steadily growing technology companies.
Disruptive innovation is about finding a public company that can grow into a great company in the next 5, 10 or more years.
In general, the target of disruptive innovation investment is very different from NASDAQ, and some companies with very small size and market capitalization will also be selected by disruptive innovation investment.
Zhao Qiyuan: In the NASDAQ 100, the cash flow of large companies is relatively sufficient, but companies like Google, the growth is less than 10%, and after the artificial intelligence comes out, there is another improvement for it.
But disruptive innovation is 30%-40% growth every year for 5-10 years, so the style of investment is different.
Until there is a serious problem with the US household balance sheet, the probability of systemic financial risk in the US is not high
Li Kaiying: We all know that some banks in the United States have exploded, how will this affect the investment environment in overseas markets?
Zhou Jing: Recently, this incident has gradually subsided.
In any interest rate hike cycle, it is normal for some small banks to have a short-term run because of the mismatch of the balance sheet, or even to be acquired by large banks, and there will be every round of interest rate hike cycle, and there is no need to make too much fuss about this matter.
Compared with 2007 and 2008, the biggest problem in the United States at that time was the subprime mortgage crisis in real estate, which led to a large-scale bankruptcy of residents' balance sheets, thus falling into a deep recession.
After 2008, the balance sheet of residents in the United States has been maintained quite well, and there are no major problems with residents' balance sheets.
From the perspective of banks, large banks such as JP Morgan, its investment side is very cautious, and it cooperates well with the liability side, so the risk of a run on large banks is relatively small.
Like Silicon Valley Bank and First Republic Bank are some relatively small regional banks with very special service targets, even if there is no financial crisis, some banks will fail every year due to poor management and too aggressive balance sheet policies, so don't worry too much.
Until there is a serious problem with the US household balance sheet, the probability of systemic financial risk in the US is not high.
Whether economic growth can slow down is the most important factor affecting the US stock market
Li Kaiying: Can you analyze the situation of the US debt problem for us, and what impact will it have on the stock market?
Zhou Jing: This issue has been solved and the two parties have reached an agreement. Historically, every time there is a so-called debt ceiling crisis, consensus has been reached before the final default.
I personally think that the main problem in the United States is whether the economic growth rate can slow down.
Overall, this is probably the most important factor affecting the US stock market.
Comprehensively macro, micro, capital, and position to judge investment opportunities in the market
Li Kaiying: As a domestic investor, there is a time difference, geography and language difference with US stocks, how can we better grasp the investment opportunities of US stocks?
Zhao Qiyuan: The macro and micro of US stocks are very important.
From a macro perspective, inflation is a very important factor, and the reason why technology stocks killed very hard last year was because inflation was high, with a peak of nearly 9%.
Last year, many people said that speculating in technology stocks is continuous speculation in inflation and interest rates, so inflation is worth paying attention to, but in the past 10 months, inflation has been a continuous downward trend.
Because at the beginning of the year, everyone was still a little uncertain about inflation, inflation was lower than expected in December last year, but the market was still plummeting. Expectations at the time were not good, and the attitude of the central bank was not particularly obvious.
However, after last month, although it has a strong stickiness, the downward trend is very obvious.
The Fed's view is also important. Because of inflation, everyone thinks that the Fed is going to raise interest rates, but after March and April, there was a period of time when it became clear that the market was not very responsive to macro data.
So after adding problems to banks, the Fed also has to think about this problem.
Secondly, stocks still have to look at the fundamentals, investors in China, it is impossible to stare at the US market every day, so the fundamentals are very important.
For example, before Tesla starts volume, before the factory in China opens, if we are very confident in the fundamentals, we can hold it for a long time.
Now many technology companies, the reason why the financial report is so good and rose so sharply, on the one hand, the fundamentals are very strong, and secondly, the molecular end has given huge growth.
Another particularly important angle is the capital side, because 780% of overseas investors are institutional investors.
Many people are very surprised that the NASDAQ rally continues this year, because at the end of last year, many large institutional positions were very low, including some large technology hedge funds because of heavy losses last year, very low positions, in this year's rapid upward trend, many funds are covering positions.
Therefore, it is necessary to judge this market from many perspectives such as macro, micro, capital, position, etc.
Overseas investors pay more attention to the growth rate of the industry
Li Kaiying: What do you think about the future market of Chinese concept stocks? Can you answer for us from the perspective of how the overseas market environment affects the trend of Chinese concept stocks?
Qiyuan Zhao: Many leading Chinese concept companies are relatively cheap in valuation, including Hong Kong technology stocks.
But from a fundamental point of view, its own growth is a reason why overseas investors are more important, because many large technology companies had alpha before the epidemic, and the entire industry grew very fast.
But at a certain stage, many people will buy large companies as the beta of the industry, buying the economic recovery of the industry, so he will think about the growth rate of the industry, how attractive this beta is, if it is attractive, it will be overmatched, and if it is not attractive, it will be low.
Overseas investors look at the fundamentals of Chinese concept stocks with a very mature eye.
Of course, some companies' earnings are very good, and some recent e-commerce companies can rise by 20% one day after the earnings report comes out.
From a fundamental point of view, he will also compare, such as how the European market is, how the US market is, and how the Japanese market is.
Many overseas markets have performed very well this year, and overseas investors will weigh the growth and valuation of different markets.
"The Most Important Things to Invest" & "Warren Buffett's Way to Invest"
Li Kaiying: Can you recommend some books to help you enrich your understanding of investment?
Zhou Jing: Howard Marks wrote "The Most Important Things to Invest", because Howard Marks has decades of experience in overseas market investment, especially for overseas markets in crisis, he is very experienced.
From this book, you can learn some experience in investing overseas, especially in overseas markets in crisis, and also help your own investment philosophy.
Zhao Qiyuan: I recommend a more traditional one about value investing - "Warren Buffett's way of investing", this book is a must-read book for value investing.
He believes that Buffett looks at the company mainly on three points:
The first point: whether the manager, the company's CEO team has integrity or loyalty.
Because when the CEO is formulating a strategy, if there is a problem with the strategy or does something bad, it is a devastating blow for investors.
The second point: the business model.
A typical example, Coca-Cola has a history of nearly 100 years, why can it constantly raise prices in the presence of competitors, and the barriers are particularly high?
It is because Coca-Cola has its own secret recipe, which can cater to the tastes of different regions and make different products, so Buffett believes that the level of the company's barriers is very important.
The third point: cash flow, Buffett's valuation of the company, is to discount the company's cash flow as bond interest, if the cash flow is not very strong, it is not so attractive to Buffett.
If you want to learn about investing, this book can give you an idea of what a more traditional value investing strategy looks like.
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