Goldman Sachs The 720 focuses on China and India strategy, AI infrastructure, the ABF supply-demand gap, and selected Asian stock opportunities.

Overview

This is a Goldman Sachs The 720 multi-theme strategy and stock research package, covering China and India equity strategy, Taiwan ABF sector, a Southeast Asia tech supply-chain review, Japan banks, Muji (Ryohin Keikaku), Xiaomi, Yaskawa Electric, BOC Hong Kong, Laopu Gold, China essential consumer, Bilibili, AI infrastructure, and global cross-asset, FX, and rates views. The central message is that structural opportunities still exist in Asian equity markets, but investors need selective positioning across AI capex, earnings recovery, valuation, policy rates, weak consumption, and inflation risk.

Core views

Key views include: first, China A shares remain a tactically preferred market because cyclical earnings momentum is more favorable and they offer undervalued diversification value for international investors; some large-cap H-share internet companies have undergone notable valuation downgrades since early in the year and may now present incremental allocation value as profits recover. Second, after the first-half pullback, Indian markets have rebound potential, with a macro backdrop supported by lower commodity prices, stable FX, and resilient domestic demand; Goldman Sachs expects NIFTY to recover toward a target of 26,500 points. Third, AI server, enterprise, and sovereign AI demand continue to drive expansion across the ABF substrate, PCB, network equipment, server, and edge infrastructure chain. Fourth, Japan’s megabanks have raised earnings forecasts and target prices due to stronger capital market activity, loan demand, and the BOJ’s rate-hike path. Fifth, consumer and gold-related names are differentiated: Muji benefits from high-profit offshore businesses, Xiaomi is supported by EV and AI progress, while Laopu Gold is pressured by gold-price pullback and slowing sales but is viewed as having valuation and dividends that already reflect much of the pressure.

Analysis framework

The report uses a combined top-down and bottom-up approach across multiple assets, regions, and sectors: macro analysis covers Chinese fiscal tools, improving India macro conditions, capital repatriation to Japan, Australia housing cycles, U.S. Fed policy, and global inflation risk; sector analysis examines ABF supply-demand gaps, AI infrastructure capex, consumer goods volumes and costs, bank net interest income, and capital returns; stock-level analysis integrates rating, 12-month target prices, earnings revisions, orders, margins, delivery volumes, and valuation to form investment conclusions.

Methodology notes

• equity strategymarket rotation and sector allocation

  market rotation and sector allocation

  The report determines allocation direction across China, India, and sectors through earnings momentum, valuation, flows, macro backdrop, and policy variables, such as an overweight in China A, rotating in India from growth to value, and from mid-cap to large-cap.

• industry supply-demandABF supply-demand gap analysis

  ABF supply-demand gap analysis

  Using AI server and general server CPU demand as core drivers, it estimates ABF substrate TAM expansion, the proportion of supply shortfall, long-term contract pricing, and spot price changes, and revises target prices and earnings forecasts accordingly.

• cross asset strategyinnovation and inflation portfolio framework

  innovation and inflation balancing framework

  The cross-asset section incorporates AI capex, technology earnings risks, inflation volatility, and fiscal risks into portfolio allocation, recommending real assets, style diversification, regional diversification, long-dated options, and selective alternatives to balance return and risk.

• stock analysisGS Factor Profile

  GS Factor Profile

  The report discloses that GS Factor Profile uses growth, financial returns, valuation multiples, and composite percentile comparisons versus the market and sector peers to provide investment context.

Asset mapping & comparison

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

• China A equities

  tactically overweight

  Strengths

  Earnings momentum is more favorable, and they provide diversification returns that appear undervalued to international investors.

  Weaknesses

  Still exposed to uncertainty in macro confidence, consumption recovery, and policy transmission.

  Comparison

  Compared with some H-shares and offshore markets, the report sees A-shares as having an advantage in cyclical earnings strength and diversification.

  Risks

  Policy effects below expectations, slower domestic demand recovery, insufficient foreign inflows.

• Large-cap H-share Internet stocks

  incremental allocation opportunity

  Strengths

  Clear de-rating early in the year, with potential multiple expansion and valuation recovery as profits improve over the next few quarters.

  Weaknesses

  Needs confirmation on profit recovery and improvements in regulation and competitive dynamics.

  Comparison

  Relative to A-shares, H-share internet is more of a valuation recovery and profit rebound trade.

  Risks

  Weak consumption, intensifying competition, and profit recovery below expectations.

• India equities / NIFTY

  rebound and rotation opportunity

  Strengths

  Macro backdrop of lower commodity prices, stable FX, and stronger domestic demand supports roughly 10% implied upside to target levels.

  Weaknesses

  A ~9% first-half pullback occurred, and the market needs foreign inflows and earnings realization.

  Comparison

  The report recommends rotation from growth to value and from mid-cap to large-cap.

  Risks

  Foreign inflows below expectations, still-rich valuations, delayed macro or earnings recovery.

• Taiwan ABF sector

  strong supply-demand gap beneficiary

  Strengths

  AI server and CPU demand are driving rapid TAM expansion, with significant shortfall expected to widen in 2027-2028, and price increases supporting upward revisions to earnings.

  Weaknesses

  Capacity expansion cycles are long, and prices and order books are sensitive to AI capex.

  Comparison

  NYPCB, Kinsus, and ZDT remain Buy, while Unimicron is Neutral.

  Risks

  AI server demand below expectations, customer bargaining pressure, and faster-than-expected capacity additions compressing supply-demand imbalance.

• Xiaomi / 01810.HK

  Buy with EV and AI dual catalysts

  Strengths

  SkyNomad N70/N90 smart SUV filing provides third-quarter catalysts, while progress in MiMo LLM scale and cost efficiency supports monetization of Xiaomi's AI ecosystem.

  Weaknesses

  EV deliveries, pricing, and AI commercialization remain in validation stages.

  Comparison

  Relative to traditional consumer electronics, the report highlights Xiaomi's multiple growth vectors across EV, consumer AI, enterprise, and physical ecosystem.

  Risks

  New model launches or deliveries below expectations, intensified competition, and slower-than-expected AI monetization.

• Laopu Gold

  Buy but target price sharply reduced

  Strengths

  Brand momentum remains healthy, lower gold procurement costs support gross margins, and a 7x 2026E P/E with roughly 10% dividend yield indicate some pressure is already reflected in valuation.

  Weaknesses

  A 20% gold-price pullback is dampening demand for fixed-price products, with Tmall Q2 sales down 63% year-over-year.

  Comparison

  Grammage-linked products are performing better than fixed-price products.

  Risks

  Further gold declines, rising price sensitivity of demand, and slower recovery in sales than expected.

• Japan megabanks

  earnings forecasts and target prices raised

  Strengths

  Strong capital market activity, increasing loan demand, and BOJ rate hikes support net interest income; FY3/29E ROE is expected to rise to 12-13%.

  Weaknesses

  Sensitive to the rate cycle, capital market activity, and credit demand.

  Comparison

  Mizuho is preferred for its stronger defensive business mix and corporate lending/GCIB positioning.

  Risks

  Changes in Japan's rate path, weakening loan demand, and cooling market activity.

• Global balanced portfolio

  reduce reliance on single-asset equities and increase diversification

  Strengths

  Real assets, style and regional diversification, long-dated calls, and alternatives can improve portfolio resilience in innovation and inflation environments.

  Weaknesses

  If both an AI boom and a benign inflation environment occur, lowering equity exposure may miss part of the upside.

  Comparison

  The report suggests that outside an optimistic "Goldilocks + AI boom" scenario, long-run equity returns may be below long-term averages.

  Risks

  Inflation volatility, fiscal risk, technology earnings deterioration, and rising rates again.

Key data

• India NIFTY target26,500 by June 2027The report states that after a roughly 9% pullback in the first half, there is approximately 10% upside.
• ABF substrate TAM growth62% 2025-28E CAGR to US$33bnGoldman Sachs expects AI server and general server CPU demand to push ABF demand growth meaningfully faster than previously expected.
• ABF supply shortfall ratio34% in 2027; 51% in 2028An expanding supply gap is expected to lift 3Q26 to at least Q4 2027 year-end LTA and spot prices year-over-year by 10-20%+.
• Foxconn Industrial Internet target priceRmb107.2 12m TPBuy is maintained, supported by AI server capacity expansion, automation, and share gains.
• Xiaomi target priceHK$40 12m TPBuy is maintained; catalysts include SkyNomad N70/N90 smart SUVs and MiMo LLM progress.
• Yaskawa Electric target price¥9,200 12m TPBuy is maintained; although Q1 profit was below expectations, orders are supported by semiconductor and AI demand.
• BOC Hong Kong target priceHK$53.30 12m TPBuy is maintained, with attention on the 2026-28 capital return plan and potential special dividends.
• Laopu Gold target priceHK$650 from HK$1,108Downward revisions to 2026-28 earnings forecasts of 9%-22% were made due to a 20% gold-price pullback and slower sales growth, but Buy is maintained.
• China NPBFI quotaRMB800bnThe report estimates this could raise the economy’s actual GDP path by about 0.5 percentage point under the base case, mainly concentrated from late 2026 to early 2027.
• Global rating distributionBuy 50%, Hold 34%, Sell 16%The disclosed table shows Goldman Sachs coverage of 3,104 stocks as of July 1, 2026.

Impact & implications

For investors, the implication is that Asian allocation should expand from a singular AI theme to broader structural opportunities, including China A shares, H-share internet, large-cap India value, ABF and AI server supply chains, Japan banks, and selected consumption and capital return names. The report also warns that if the Fed re-tightens, inflation volatility rises, AI-giant earnings fail to improve, consumption weakens further, or gold-price swings intensify, equity valuations and earnings expectations could come under pressure. At the portfolio level, investors need allocations to both growth beneficiaries and inflation-hedging, diversified assets.

Risks

• If the Fed tightens again, equities may be pressured in the near term and the funding cost of AI capex may rise.
• If the AI capex cycle does not translate into higher profits for technology giants, equity returns could be hurt.
• Inflation volatility and fiscal risks could weaken conventional balanced portfolio performance.
• Consumption sentiment in China and weather factors are slowing essential goods sales, and earnings forecasts for some companies were lowered.
• The gold-price pullback is creating pressure on sales of fixed-price gold products.
• While the Southeast Asia tech supply chain has diversification value, Thailand and Vietnam production costs may be up to 20% higher than mainland China.
• It remains uncertain whether repatriating capital to Japan will be sufficient in scale, and a major GPIF strategy shift is unlikely before 2030.

What to watch

• Repricing of China A earnings momentum and the diversification value of China assets by international investors.
• Profit recovery over the next few quarters for large-cap H-share internet companies.
• Recovery of foreign inflows into India, progress toward the NIFTY target of 26,500, and the rotation from growth to value in the market.
• ABF substrate supply-demand gaps in 2027-2028, post-3Q26 price increases, and the persistence of AI server orders.
• Official launch of Xiaomi SkyNomad N70/N90, 2026E/2027E delivery volumes, and MiMo V3 model cost efficiency.
• Laopu Gold sales recovery after the gold-price pullback, gross margins, and dividend realization.
• Japan megabanks net interest income, ROE, and capital market business activity.
• Fed inflation prints, market-implied rate-cut expectations, and USD, JPY, and RMB path dynamics.