Text | GuShiio.com鼔狮智能  鼔狮的大大

Key points and views of the report

1. Revaluation of AI-related stocks: UBS believes that the rapid development and application of AI technology will drive the valuation of related companies. Infrastructure providers (such as IDC companies and hardware manufacturers) will be the first to gain revenue benefits from AI applications. Software stocks are expected to usher in a significant valuation re-rating in the next few years, with the price-to-sales ratio (P/S) rising by 4-14 times during the period.

2. China-US technology stock benchmarking: UBS listed the following groups of China-US technology companies benchmarking and analyzed the valuation differences:

   • Cambrian: As China’s leading AI chip manufacturer, Cambrian’s valuation is three times higher than Nvidia.
   • Xiaomi: Xiaomi is developing rapidly in the fields of smart hardware and AI, but its valuation is 80% lower than Tesla.
   • Li Auto: Li Auto’s valuation is 90% lower than Tesla, showing the market’s expectations for its future development.
   • SMIC: SMIC’s valuation is 15% lower than TSMC, and its importance in the field of AI chip manufacturing is gradually becoming more prominent.

3. Investment advice: UBS recommends investors to pay attention to software stocks, infrastructure providers and new energy vehicles, especially new car-making forces with technical backgrounds, such as Weilai, Xiaopeng and Ideal.

   Chinese companies	U.S. counterparts	Valuation differences	Technology/ecological advantages
   Cambrian	NVIDIA	+312%	Siyuan 590 chip computing power is comparable to H100
   SMIC	TSMC	-15%	7nm yield exceeds 90%
   Xiaomi Group	Tesla	-80%	The number of AIoT device connections exceeds 1 billion
   Liang Auto	Tesla	-90%	Urban NOA landing speed leads by 40%
   iFlytek	Nuance	+220%	67% of voice interaction market share

Comments from multiple mainstream media

Bulls: Valuation repair and ecological breakthrough 

Wall Street News: Chinese technology stocks are generally valued lower than their US counterparts, but the growth potential driven by AI technology may bring about a “Davis double-click”;

Today’s Headlines: The progress of Cambrian’s ecosystem replacing CUDA has exceeded expectations, and Xiaomi’s smart hardware ecosystem may become the “Chinese version of Tesla”;
Securities Star: The DeepSeek model reduces the reliance on computing power, indirectly weakens the impact of the US technology blockade, and catalyzes the return of foreign capital.

Cautious faction: Bubble risk and technical bottleneck

UBS warning: Some AI chip companies have a P/S of 50x, exceeding Nvidia’s 25x warning line; new car-making forces have a loss of 42,000 yuan per vehicle;

Goldman Sachs report: SMIC’s performance is affected by fluctuations in consumer electronics demand, and attention should be paid to changes in capacity utilization.

Impact on Chinese, Hong Kong and US stocks

1. Impact on Chinese stocks: UBS’s report pointed out that all factors in China’s A-share market will rebound by the end of 2024, especially the IT and healthcare sectors have high valuations. The report believes that the explanatory power of macroeconomic drivers is relatively stable, and market valuations have risen slightly. The revaluation of AI-related stocks will further drive the rise of the A-share market.
2. Impact on Hong Kong stocks: UBS expects Hong Kong stocks to face severe challenges in 2025. Even if the United States starts a rate cut cycle, the potential 60% tariff imposed by the United States on China and the escalation of Sino-US strife may slow down Hong Kong’s economic growth. There is a risk of downward adjustment in the valuation multiples of Hong Kong stocks, and the Hang Seng Index is expected to only reach 20,000 points by the end of 2025.

3. Impact on the United States: The impact of UBS’s report on the US market is mainly reflected in the valuation analysis of Chinese technology companies. The report points out that the valuations of Chinese technology companies are generally lower than those of their US counterparts, which may affect the investment decisions of US investors in Chinese technology companies. In addition, the development of AI technology will also exert certain competitive pressure on US technology companies.

Market impact: Chain reaction of the three stock markets

   China’s stock market: Structural market trends

• A-shares: Software stocks (Kingsoft Office, iFlytek) have the greatest elasticity, while hardware equipment (North China Huachuang, China Micro) benefit from domestic substitution;
• Hong Kong stocks: Hang Seng Technology Index PE_TTM is only 19.6 times, 58% lower than Nasdaq, and the return of foreign capital may promote a 15% recovery space.

   US stocks: Competition and cooperation intertwined

• Direct impact: Cambrian and SMIC’s technological breakthroughs may squeeze Nvidia and TSMC’s market share;
• Indirect opportunities: Tesla may cooperate with Chinese car companies by licensing FSD technology, and Meta can leverage the WeChat ecosystem to expand the Metaverse.

   Global Capital: Repricing Chinese Technology

• Foreign Investment Trends: In February, foreign investment inflows into the Hong Kong stock market technology sector reached HK$12.76 billion, and insurance funds increased their holdings of technology stocks by 32 billion yuan;
• Valuation Anchoring: MSCI China’s target price was raised to 77, indicating that Chinese concept stocks still have room for mid-to-high single-digit growth.

Summary