AI infrastructure and Japanese banks remain strong, while China hotel and restaurant demand remains under pressure

Overview

This report is Goldman Sachs' The 720 global multi-theme research summary, combining macro market views, industry high-frequency data, company results, and earnings forecasts. It covers optical networks, global assets, China hotels and OTAs, Japanese banks, baijiu, robotics, semiconductor equipment, tires, restaurants, internet platforms, and Bank of Japan policy. The overall view is constructive, with AI capex, recovering financing demand, and better-than-expected company results as key supports, while volatility in consumer demand, rising rates, and trade restrictions are the main constraints.

Core views

For optical networks, AI demand, technology migration, and raw-material tightness will increase customers' reliance on suppliers with leading R&D and manufacturing capabilities, while Southeast Asian capacity expansion can partly mitigate supply-chain risks. For global markets, energy prices are expected to remain range-bound, the Fed may continue to wait and see, and strong earnings help ease AI concerns. China hotels and OTAs may see slower revenue and profit growth in the second quarter; Japanese banks are supported by strong loan growth and rising rates; and Kweichow Moutai's direct-store price increases are favorable for price stability. Ninebot, All Ring Tech, and Yokohama Rubber all recorded positive earnings signals. Alphabet and Nebius continue to benefit from AI platform commercialization and insufficient computing supply. More hawkish BOJ inflation discussions raise the probability of an earlier rate hike.

Analysis framework

The report uses macro scenario analysis, industry high-frequency indicators, comparisons of company results and guidance, earnings forecast revisions, target price assessments, and cross-company competitiveness comparisons. The macro section builds a base case around oil prices, rates, AI, and policy paths; the company section focuses on revenue growth, margins, product mix, capex, capacity expansion, and valuation targets.

Methodology notes

• Equity factor analysisGS Factor Profile

  Measures relative stock characteristics through growth, financial returns, and valuation multiples

  Growth metrics are mainly based on forward sales, EBITDA, and EPS growth; financial returns are mainly based on ROE, ROCE, and CROCI; valuation multiples include P/E, P/B, dividend yield, and enterprise value-related metrics. The composite percentile is the average of the growth percentile, financial return percentile, and inverse valuation percentile.

• M&A probability assessmentM&A Rank

  Assesses the probability that a company becomes an acquisition target through qualitative and quantitative factors

  Rank 1 corresponds to a relatively high acquisition probability of 30% to 50%, Rank 2 corresponds to a medium probability of 15% to 30%, and Rank 3 corresponds to a low probability of 0% to 15%; Rank 1 or 2 can include M&A factors in the target price.

• Fundamental databaseQuantum

  Used for in-depth single-company analysis and cross-industry, cross-market comparisons

  This proprietary database provides detailed financial statement history, forecasts, and financial ratios to support earnings forecasts, valuations, and company comparisons.

Asset mapping & comparison

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

• China optical communications industry leaders

  Benefit from AI data center demand, technology migration, and 1.6T module capacity expansion

  Strengths

  Strong R&D capabilities, high manufacturing efficiency, relatively strong customer stickiness, and active diversification of capacity into Southeast Asia such as Thailand.

  Weaknesses

  Raw material supply is tight, and overseas capacity migration requires execution time.

  Comparison

  Incumbent leaders with technology and scale advantages are better able than new entrants to meet customers' high-end demand.

  Risks

  Potential U.S. import restrictions, supply-chain disruptions, macro uncertainty, and capacity expansion execution risk.

• China hotels and OTA sector

  Demand and earnings growth are expected to slow in the second quarter of 2026

  Strengths

  Low air-ticket prices may promote demand recovery, Atour has strong retail and supply-chain sales, and Trip.com has solid execution and room for overseas expansion.

  Weaknesses

  Occupancy is declining, revenue per available room is weakening, and net hotel additions are slowing.

  Comparison

  Goldman Sachs prefers Trip.com among OTAs and lowered the 12-month target prices for Tongcheng, Jinjiang, and BTG.

  Risks

  Persistent weakness in travel demand, volatility in high-frequency data, and industry supply expansion below expectations.

• Major Japanese banks

  Growth in financing demand and rising interest rates are expected to boost net interest income

  Strengths

  Corporate loan demand covers multiple areas including capex, M&A, and business succession, and loan spreads have room to recover.

  Weaknesses

  Rapid loan growth may push up loan-to-deposit ratios and increase liability management pressure.

  Comparison

  Mizuho, MUFG, and SMFG all have Buy ratings, with Mizuho on the Conviction List.

  Risks

  Rising funding costs, intensified deposit competition, and a weakening credit cycle.

• Kweichow Moutai (600519.SS)

  Direct-store price increases and tighter supply in the second half help stabilize the pricing system

  Strengths

  Strong brand power and better ability to capture corporate demand through differentiated online and offline pricing.

  Weaknesses

  The short-term operating focus remains stabilizing wholesale prices rather than significantly increasing sales volume.

  Comparison

  Against a backdrop of weak consumer demand, Kweichow Moutai shows stronger defensiveness through its brand and channel reforms.

  Risks

  Pressure on wholesale prices, demand falling short of expectations, and channel reform effectiveness below expectations.

• Ninebot (689009.SS)

  High growth in lawn-mowing robots drove second-quarter 2026 results above expectations

  Strengths

  Robotics business growth is strong, electric two-wheelers still perform well amid weak industry demand, and the share of high-margin products is rising.

  Weaknesses

  Faces cost inflation and adverse exchange-rate effects.

  Comparison

  The robotics business provides higher growth and margin support than traditional electric two-wheelers.

  Risks

  Slower robotics demand, cost increases, exchange-rate volatility, and industry competition.

• All Ring Tech

  Higher contribution from CoWoS-related business drove margins above expectations

  Strengths

  Benefits from continued CoWoS capacity expansion, gradual CPO ramp-up, and potential U.S. customer opportunities.

  Weaknesses

  Higher operating expenses such as employee bonuses led to cuts in earnings forecasts and target price.

  Comparison

  Short-term earnings expense pressure coexists with medium- to long-term structural growth in AI semiconductor equipment.

  Risks

  Fourth-quarter seasonal slowdown, expenses above expectations, and delays in new business introduction.

• Yokohama Rubber

  European passenger-car tire sales and agricultural tire share gains drove upward earnings revisions

  Strengths

  Improved cost competitiveness, market share gains, and enhanced shareholder returns.

  Weaknesses

  The business remains affected by regional auto demand and raw material costs.

  Comparison

  Second-quarter profit was significantly above expectations, and management simultaneously raised sales, profit, and dividend guidance.

  Risks

  Weaker tire demand, rising raw material costs, and exchange-rate volatility.

• China restaurant sector

  Same-store sales growth was broadly weak in July, but some companies showed resilience

  Strengths

  Yum China is supported by addressable market expansion and value-for-money strategies, while Guming remains stable through category expansion.

  Weaknesses

  Unfavorable weather in South China, a high base in the same period last year, and ongoing competition in freshly made beverages.

  Comparison

  Leading companies maintain relatively restrained pricing discipline and are more resilient than the overall industry.

  Risks

  Intensified promotional competition, insufficient traffic recovery, and the impact of extreme weather.

• Alphabet (GOOGL.US)

  Transforming from a research-driven AI organization to a scaled AI platform

  Strengths

  Has broad distribution channels, diversified monetization methods, scaled infrastructure, and Google Cloud platform advantages.

  Weaknesses

  AI commercialization requires continued capital investment and organizational execution.

  Comparison

  Compared with single-product AI companies, Alphabet can monetize through both consumer product distribution and cloud infrastructure.

  Risks

  Intensified AI competition, capex returns below expectations, regulatory pressure, and slowing cloud business growth.

• Nebius (NBIS.US)

  AI infrastructure demand exceeds supply, while pricing and contract quality are improving

  Strengths

  The full-stack AI platform has differentiated competitive advantages over bare-metal services, and contracted power resource expansion targets are ambitious.

  Weaknesses

  Growth is highly dependent on capacity delivery, enterprise customer ramp-up, and execution of the partner model.

  Comparison

  Compared with service providers that only offer basic computing power, Nebius emphasizes full-stack capabilities integrating software and hardware.

  Risks

  Capacity expansion delays, asset-light model economics below expectations, customer concentration, and cloud self-build capabilities by large platforms such as Meta.

• Global equities and rates assets

  A benign macro base case supports equities and carry strategies, but long-end rates pose a near-term threat

  Strengths

  Controlled energy prices, the Fed remaining on hold, and strong earnings jointly support risk assets.

  Weaknesses

  Markets remain sensitive to inflation, policy, and AI investment returns.

  Comparison

  Equity upside potential is more favorable than the view on long-duration rates assets, and a low macro-volatility environment is favorable for carry strategies.

  Risks

  Rapid rise in long-end rates, escalation of the Middle East situation, inflation rebound, and downward revisions to AI earnings expectations.

• Japanese rates and yen

  BOJ policy discussions have turned more hawkish, increasing the probability of an earlier rate hike

  Strengths

  A potential rate hike reflects improvement in underlying inflation and the demand environment.

  Weaknesses

  The policy path remains highly uncertain.

  Comparison

  The base case is a rate hike in January 2027, but the risk scenario has shifted forward to October 2026.

  Risks

  Rising crude oil prices, yen depreciation, and AI-related demand further lifting inflation, resulting in tighter-than-expected policy.

Key data

• July loan balance growth at Japanese city banksUp 8.0% year over yearFinancing growth was driven by demand such as capex, M&A, and business succession.
• Kweichow Moutai direct-store price increaseFour products raised by 2% to 3%Covers products including Feitian Moutai and involves 42 direct-operated stores.
• Kweichow Moutai 12-month target priceRMB1,667Maintains Buy rating.
• Ninebot core operating profitUp 22% year over yearSecond-quarter 2026 results were above expectations.
• Ninebot robotics business growthApproximately 120% year-over-year growth in the first half of 2026Mainly driven by lawn-mowing robots and exceeded management guidance.
• Ninebot 12-month target priceRMB62Maintains Buy rating.
• All Ring Tech third-quarter 2026 revenue forecastUp 29% quarter over quarterMainly driven by continued growth in CoWoS demand.
• All Ring Tech 2027 revenue forecastUp 44% year over yearSupported by CoWoS capacity expansion, gradual CPO ramp-up, and new business opportunities with U.S. customers.
• All Ring Tech 12-month target priceNT$1,450Lowered from NT$1,550, but Buy rating maintained.
• Yokohama Rubber second-quarter business profitJPY51.4 billionDriven by European tire sales and higher agricultural tire share, significantly above expectations.
• Yokohama Rubber 12-month target priceJPY9,500Raised from JPY8,500 and Buy rating maintained.
• Alphabet 12-month target priceUS$435Maintains Buy rating, with the core thesis being scaled AI platform development and cloud business monetization.
• Nebius contracted power targetOver 4GW by year-end 2026Investors will focus on capacity expansion execution and the economics of the asset-light partnership model.
• Nebius 12-month target priceUS$286Maintains Buy rating.
• Base-case expectation for the BOJ's next rate hikeJanuary 2027Risks are clearly skewed earlier, with a rate hike possible as early as October 2026.

Impact & implications

From an asset allocation perspective, AI infrastructure, optical communications, internet cloud platforms, and Japanese banks remain relatively attractive; strong earnings and tight supply-demand conditions support related companies. China's consumer services sector is more differentiated: demand for hotels, restaurants, and freshly made beverages is weak, but companies with overseas expansion, value positioning, category expansion, or retail supply-chain capabilities may be more resilient. A potential earlier BOJ rate hike is positive for bank spreads, but may push up global long-end rates and yen volatility, pressuring high-valuation growth assets.

Risks

• U.S. import restrictions on Chinese data center components could disrupt the optical communications supply chain.
• Rising global long-end rates could pressure equity valuations and weaken carry strategy performance.
• Escalation of the Middle East situation could drive oil prices and inflation above expectations.
• Demand for China travel, hotels, restaurants, and freshly made beverages remains persistently weak.
• The Bank of Japan raising rates earlier than expected could trigger volatility in the yen, bonds, and global liquidity.
• AI infrastructure capacity expansion or commercialization may progress more slowly than expected, pressuring capex returns.
• Raw materials, employee expenses, and exchange-rate volatility could erode corporate margins.
• Companies covered in the research may have investment banking relationships and other potential conflicts of interest.

What to watch

• Changes in U.S. import policies for China optical communications and data center components.
• 1.6T optical module demand, raw material supply, and the progress of Southeast Asian capacity ramp-up.
• China hotel occupancy, revenue per available room, and net hotel additions.
• Sustainability of Trip.com's overseas business and Atour's retail and supply-chain sales.
• Japanese bank loan growth, loan-to-deposit ratios, deposit costs, and loan spreads.
• Feitian Moutai supply in the second half, wholesale prices, and the effectiveness of direct-channel reforms.
• Ninebot's lawn-mowing robot growth and margin improvement from product mix.
• CoWoS and CPO capacity expansion pace and All Ring Tech's expense control.
• Alphabet's consumer AI distribution and Google Cloud monetization progress.
• Nebius enterprise customer ramp-up, contracted power expansion, and economics of the asset-light model.
• Bank of Japan meeting statements and the possibility of an early rate hike in October 2026.
• U.S. core inflation, long-end rates, and global energy price trends.