Goldman Sachs' The 720 focuses on China's AI model upgrades, initial coverage of Asian companies, and the AI infrastructure investment chain

Overview

This is a Goldman Sachs weekly-style research compilation covering Asia and global cross-asset themes. Its core focus is China AI models, initial coverage of Asian companies, bank and internet earnings previews, AI infrastructure materials, gold, global rates and power demand. The report first emphasizes that Kimi K3's launch has improved the competitive position of Chinese models in global coding capability and high-end model pricing, while expecting low-end API prices to remain constrained by subsidies. It then covers various companies and sectors, including Iluvatar, GO Inc., Indian auto parts, Singapore Banks, HSBC, Japan Games & Internet, Taiwan CCL, Nongfu Spring, JD Health, Xiaomi, Mitac, Montage, Reliance Industries and JSW Steel.

Core views

The core view is that AI capital expenditure remains one of the main themes in Asian and global markets, but opportunities are highly differentiated. Goldman Sachs favors Iluvatar, which benefits from Chinese cloud providers' capital expenditure, domestic AI-chip substitution and high-end computing demand, as well as Montage, Taiwan CCL, Mitac and other value-chain segments supported by AI servers, data centers and high-end materials. Meanwhile, the report believes Singapore banks and HSBC are supported by a more favorable interest-rate environment, loan and deposit growth and stable credit costs; gold is supported by central-bank purchases; and power and natural-gas infrastructure are driven by AI data-center demand. Negative or neutral factors include low-end AI API price competition, weak retail and consumption, rising costs, below-expected shipments of some gaming hardware, weakening basic-materials orders and pressure on low-profitability companies from the restoration of the battery consumption tax.

Analysis framework

The report uses a multi-theme research compilation approach, placing initial company coverage, earnings previews, results reviews, thematic research and macro cross-asset views within a single framework. The main evidence consists of 12-month target prices, ratings, earnings-forecast revisions, industry CAGRs, margin changes, capital-expenditure cycles, supply-demand gaps, price pass-through and macro interest-rate assumptions. At the company level, it compares revenue growth, EBITDA or net income, product-mix upgrades, margins, valuations and target-price changes. For macro and commodities, it focuses on central-bank gold purchases, inflation, yield curves, USD/JPY, AI investment and power demand.

Methodology notes

• Equity factor assessmentGS Factor Profile

  Four categories of attributes: Growth, Financial Returns, Multiple and Integrated

  Goldman Sachs calculates normalized rankings using indicators including forecast sales growth, EBITDA growth, EPS growth, ROE, ROCE, CROCI and valuation multiples, producing percentile comparisons against the market and industry peers.

• M&A likelihood assessmentM&A Rank

  A 1-to-3 score measuring the probability that a company becomes an acquisition target

  Rank 1 represents a higher probability of M&A, Rank 2 a medium probability and Rank 3 a lower probability; M&A factors may be incorporated into target prices for Rank 1 or 2 companies.

• Financial data platformQuantum

  Goldman Sachs' proprietary financial database

  Quantum is used to query detailed financial history, forecasts and ratios, supporting in-depth single-company analysis and cross-company, cross-industry comparisons.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Alibaba、GDS、VNET、Kingsoft Cloud、MiniMax

  Beneficiaries of rising Chinese AI-model activity and cloud capital expenditure

  Strengths

  Growth in cloud and high-end computing demand; some companies have advantages in hyperscale cloud or IDC resources.

  Weaknesses

  Low-end API prices are pressured by subsidies from cash-rich companies.

  Comparison

  The report favors beneficiaries of cloud capital expenditure rather than participants in low-end price competition.

  Risks

  Intensifying high-end model competition, computing-resource bottlenecks and longer-than-expected price subsidies.

• Iluvatar

  Direct beneficiary of rising Chinese AI capital expenditure and domestic GPGPU substitution

  Strengths

  Buy rating, HK$1,000 12-month target price, and forecast AI-chip shipment CAGR of 92% from 2025 to 2030E.

  Weaknesses

  Growth depends on cloud-provider capital expenditure, expansion of the domestic ecosystem and continued product upgrades.

  Comparison

  Compared with reliance on a single overseas supplier, domestic suppliers are supported by strategic substitution demand.

  Risks

  Product delivery, ecosystem compatibility, competition and capital-expenditure-cycle volatility.

• GO Inc.

  Beneficiary of rising ride-hailing penetration and price increases in Japan

  Strengths

  Buy rating, ¥3,900 12-month target price, and an attractive asset-light model with improving margins.

  Weaknesses

  Revenue growth depends on higher ride volumes and the continuation of price increases.

  Comparison

  Japan's ride-hailing penetration remains low, leaving room for growth.

  Risks

  Regulation, implementation of price increases, demand elasticity and changes in competition.

• Sansera Engineering、Craftsman Automation、Samvardhana Motherson、Bharat Forge

  Indian auto-parts companies transitioning toward semiconductor, defense, data-center and aerospace supply chains

  Strengths

  Industry revenue and EBITDA are expected to grow 10% and 15%, respectively, from FY26 to FY30E; Sansera and Craftsman are rated Buy.

  Weaknesses

  Samvardhana has a mature operating profile, while Bharat Forge's defense transition and commercial-vehicle recovery may already be priced in.

  Comparison

  The report favors Sansera and Craftsman for their greater transformation upside.

  Risks

  Cyclical auto demand, execution of the transformation and favorable expectations already reflected in valuations.

• Singapore Banks、HSBC

  Supported by a more constructive rate environment, loan and deposit growth and wealth-management fees

  Strengths

  Goldman Sachs raised FY26-FY28E EPS forecasts and 12-month target prices for Singapore banks; HSBC is expected to resume buybacks.

  Weaknesses

  Bank NII and valuations remain sensitive to the interest-rate path.

  Comparison

  The report names DBS and OCBC as Buys and says HSBC.L is on the EMEA Conviction List.

  Risks

  A change in rates, rising credit costs and slowing wealth-management momentum.

• EMC、TUC

  Beneficiaries of demand and price increases for high-end copper-clad laminates

  Strengths

  High-end CCL demand is expected to grow at a 96% CAGR from 2025 to 2028E, far above 22% supply growth.

  Weaknesses

  High-end capacity expansion and customers' ability to absorb costs are key variables.

  Comparison

  The report maintains Buy ratings on EMC and TUC and raises their 12-month target prices.

  Risks

  Volatility in AI-customer demand, faster-than-expected capacity releases and smaller-than-expected price increases.

• Xiaomi

  Beneficiary of AI applications in robotics, smart EVs, smartphones and home-appliance factories

  Strengths

  The report says its robotics framework has begun integrating hardware, data and foundation-model layers, with a 98% task success rate on the production line.

  Weaknesses

  Commercial applications over the next three to five years are likely to be more structured; near-term monetization remains to be validated.

  Comparison

  The report believes the current market capitalization implies zero value for the AI and robotics businesses.

  Risks

  The SkyNomad EV launch, the pace of robotics commercialization, competition and execution.

• Montage

  Semiconductor beneficiary driven by DDR5 Gen-3/Gen-4, PCIe retimers and AI-agent demand

  Strengths

  The 2Q26 net-income guidance midpoint was 48% above Goldman Sachs' estimate, and 2026E earnings were raised by 8%.

  Weaknesses

  Growth depends on continued delivery of product-mix upgrades.

  Comparison

  It has a clear earnings-upgrade signal among AI-related memory-interface and interconnect chips.

  Risks

  AI-server demand, product ramp-up, competition and the sustainability of non-operating income.

• Gold

  Supported by continued emerging-market central-bank purchases and geopolitical risks

  Strengths

  Goldman Sachs maintains its $4,900/toz end-2026 forecast and estimates central-bank purchases of 81 tons in May.

  Weaknesses

  Hawkish Federal Reserve pricing and inflation concerns are weighing on ETF demand in the short term.

  Comparison

  Gold provides cross-asset diversification as a non-AI thematic asset.

  Risks

  Higher real rates, a stronger dollar and continued weakness in ETF demand.

• US power、gas midstream、copper

  Supported by AI data-center power demand and grid-reliability requirements

  Strengths

  The report favors gas midstream, independent power producers, specialty contractors and copper exposure.

  Weaknesses

  Some exploration and production assets are affected by pressure from benchmark prices.

  Comparison

  For defensive power exposure, the report favors selected utilities and gas midstream; for cyclical exposure, it focuses on Talen Energy, Argan, Cameco and Freeport-McMoRan.

  Risks

  Natural-gas prices, PJM capacity auctions, regulation and the pace of data-center construction.

Key data

• Kimi K3 model parameter scale2.8 trillion parametersThe report says the model sets a new frontier for Chinese models in global coding capability and high-end pricing.
• Kimi K3 model pricingUS$2.3 per million tokensPricing for a high-end Chinese model reached a new high, while low-end API prices remain constrained by subsidies.
• Iluvatar rating and target priceBuy; 12m TP HK$1,000Initial coverage; the core thesis is rising Chinese AI capital expenditure, domestic chip substitution and product-mix upgrades.
• Iluvatar AI-chip shipment growth92% CAGR in 2025-30EThe report forecasts shipments exceeding 1 million units by 2030E.
• GO Inc. rating and target priceBuy; 12m TP ¥3,900Initial coverage; the company benefits from rising ride-hailing penetration in Japan, price increases and margin expansion.
• Indian auto-parts industry growth expectationsRevenue 10% CAGR; EBITDA 15% CAGR over FY26-FY30EGrowth is supported by transformation toward adjacent supply chains such as semiconductors, defense, data centers and aerospace.
• HSBC 2Q26 underlying pretax profit estimateUS$10.2bnGoldman Sachs says this estimate is 4% above consensus and expects the resumption of US$1.5bn in share buybacks.
• Taiwan high-end CCL demand growth96% 2025-28E CAGRSignificantly above 22% supply growth, supporting high-end price increases and margin improvement.
• Xiaomi robotics application metric98% task success rateThe metric comes from humanoid-robot deployment at the self-tapping-nut loading station on an automotive production line.
• Montage earnings guidance2Q26 net income guidance midpoint 48% above GS estimateDriven by interconnect-chip growth, non-operating income and DDR5 Gen-3/Gen-4 product upgrades.
• Reliance Industries target-price revision12m TP lowered to Rs1,870 from Rs1,910O2C offsets declining retail margins, but JioMart infrastructure investment weighs on FY27 margins.
• JSW Steel target priceINR 1,525Q1FY27 consolidated EBITDA was INR 93.8bn, 10% above Goldman Sachs' estimate.
• Gold price forecast$4,900/toz end-2026Goldman Sachs believes sustained diversification purchases by emerging-market central banks provide a structural price floor.

Impact & implications

For investors, the report reinforces that AI infrastructure remains an important theme in Asian equities and global cross-asset allocation, but recommends moving beyond simply chasing the AI theme to identify segments with tight supply and demand, visible capital expenditure, upward earnings revisions and pricing power. Cloud-provider capital expenditure, domestic AI chips, high-end CCL, DDR5 interface chips, data-center power supply, natural-gas infrastructure and copper may benefit most clearly, while low-end AI APIs, consumer goods, basic materials, some battery companies and gaming companies facing near-term hardware shipment pressure are likely to see greater differentiation.

Risks

• Competition among China's high-end AI models may intensify further in the second half of 2026, potentially compressing commercialization returns for some models and APIs.
• Low-end API prices may remain low because of subsidies from cash-rich companies.
• Video generation and high-end AI applications are constrained by scarce computing resources, and insufficient supply may limit revenue realization.
• Consumer goods, basic materials and some auto-related demand remain affected by weak macro conditions, seasonality and slower export momentum.
• Cost risks include PET, raw materials, memory, depreciation, AI-server rack conversion costs and the restoration of the battery consumption tax.
• Earnings upgrades or thematic enthusiasm for some stocks may already be reflected in valuations; if results do not materially exceed expectations, share prices may react negatively.
• Changes in the interest-rate path, HIBOR, USD/JPY, inflation and Federal Reserve pricing will affect views on banks, gold, rates and Japan strategies.

What to watch

• The pace of large-parameter Chinese model launches in the second half of 2026, high-end coding-model pricing and the intensity of low-end API subsidies.
• Capital expenditure by major Chinese cloud-service providers, domestic AI-chip procurement and Iluvatar's shipment ramp-up.
• Implementation of the second round of 10%-15% price increases for Taiwan high-end CCL and AI customers' ability to absorb costs.
• 2Q26 results for Singapore Banks and HSBC, including NII, credit costs and buyback execution.
• Nintendo Switch 2 hardware shipments, first-party game pipelines and earnings momentum among AI beneficiaries in Japan Games & Internet.
• The scaling of Xiaomi robotics deployments in smart EV, smartphone and home-appliance factories, as well as progress on the SkyNomad EV launch.
• The duration of the drag on Reliance Industries' retail margins from JioMart investment, and O2C profit sensitivity to discounted Russian crude and tight product markets.
• Central-bank gold purchases, ETF demand, real rates and changes in geopolitical risks.
• The actual impact of AI data-center construction on demand for natural gas, power, copper and grid infrastructure.