Goldman Sachs' The 720: Asian equity rotation, AI infrastructure, and cross-asset inflation risks in parallel

Overview

This is a multi-theme strategy summary from Goldman Sachs global investment research, covering China and India equity strategies, Taiwan ABF, the Greater China Technology overseas expansion tour, Japanese banks, Ryohin Keikaku, Xiaomi, Yaskawa Electric, BOC Hong Kong, Laopu Gold, Chinese consumer goods, Bilibili, AI infrastructure, and global cross-asset, foreign-exchange, and interest-rate views. The report's central message is that clear rotational opportunities exist within Asian markets, AI infrastructure demand continues to drive the technology hardware chain, and global asset allocation must simultaneously address the benefits of AI innovation, inflation volatility, fiscal risks, and interest-rate uncertainty.

Core views

In China, Goldman Sachs maintains an Overweight on China A-shares, favoring sectors such as materials, capital goods, and insurance that may provide alpha outside AI, while recommending gradual attention to large-cap H-share internet companies that have experienced significant valuation compression this year. In India, the report believes that improving macro conditions, lower commodity prices, a stable exchange rate, and resilient domestic demand will drive foreign capital inflows, leaving room for the NIFTY to rebound toward the 26,500 target. In technology, ABF shortages and stronger-than-expected AI server demand are among the strongest themes. Although Greater China technology companies face cost premiums when expanding in Thailand and Vietnam, customers are willing to pay a premium for supply-chain diversification. At the individual-stock level, most companies mentioned retain Buy ratings or positive views, while Laopu Gold's earnings forecasts and target price were lowered due to a pullback in gold prices and slower sales. At the cross-asset level, the report believes that outside the optimistic 'Goldilocks + AI boom' scenario, long-term equity returns may fall below historical averages, requiring lower single-equity exposure and greater use of diversification tools.

Analysis framework

The report applies a multilayered research framework: first, it compares China A-shares, H-shares, India, and Japanese banks at the country and market levels using earnings, valuation, fund flows, and policy variables; second, it assesses ABF, PCB, networking equipment, AI servers, and Southeast Asian capacity transfers from a supply-chain research perspective; third, it tracks specific stocks through company fundamentals, earnings previews, orders, margins, target prices, and ratings; and fourth, it analyzes AI capital expenditure, inflation, fiscal risks, foreign exchange, interest rates, and portfolio allocation using a macro and cross-asset framework.

Methodology notes

• Strategic allocationMarket and sector Overweight/Underweight framework

  Assess relative market or sector attractiveness through earnings momentum, valuation, fund flows, policy, and thematic catalysts.

  The report expresses relative allocation views through an Overweight on China A-shares, an Indian rebound thesis, an upgrade of utilities to Overweight, and preferences for materials, capital goods, and insurance.

• Supply-chain researchSupply-demand gap and TAM analysis

  Assess industry momentum through demand growth, capacity expansion, supply gaps, and price trends.

  The Taiwan ABF section supports target-price and earnings upgrades using 2025-2028E TAM CAGR, projected supply shortages in 2027 and 2028, and price increases.

• Company researchTarget prices, ratings, and earnings revisions

  Adjust earnings forecasts, ratings, and 12-month target prices based on results, orders, margins, valuation, and catalysts.

  The report provides rating or target-price information for NYPCB, Kinsus, Unimicron, ZDT, Japan's three major banks, Ryohin Keikaku, Xiaomi, Yaskawa, BOC Hong Kong, Laopu Gold, and Bilibili.

• Portfolio managementBalancing Innovation and Inflation

  Balance asset allocation between the AI innovation upcycle and inflation, fiscal, and interest-rate risks.

  The cross-asset section recommends selected real assets, style diversification, regional diversification, long-term call options, and alternative assets to reduce concentrated equity and technology risk.

• Goldman Sachs proprietary frameworkGS Factor Profile

  Compare stocks with the broader market and industry peers across Growth, Financial Returns, Multiple, and Integrated dimensions.

  The disclosure section states that this framework is based on standardized rankings of indicators including sales, EBITDA, EPS, ROE, ROCE, CROCI, P/E, P/B, and EV/EBITDA.

Asset mapping & comparison

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

• China A-shares

  Tactical Overweight

  Strengths

  Relatively more favorable earnings momentum and undervalued diversification value for international investors.

  Weaknesses

  Still affected by consumer sentiment, the property chain, and the effectiveness of macro-policy implementation.

  Comparison

  The view is more explicit than for some H-share internet companies; however, the report also recommends gradually allocating to selected large-cap H-share internet companies.

  Risks

  Policy implementation below expectations, slower-than-expected earnings recovery, and volatile fund flows.

• Indian equities/NIFTY

  Rebound opportunity

  Strengths

  Lower commodity prices, exchange-rate stability, resilient domestic growth, and potential foreign-capital inflows may support the market.

  Weaknesses

  The market declined 9% in the first half, and valuations require more reasonable sector selection.

  Comparison

  The report expects a rotation from growth to value and from mid-caps to large caps.

  Risks

  Foreign capital fails to return as expected, macroeconomic improvement is not sustained, and earnings delivery is insufficient.

• Taiwan ABF supply chain

  Strong cyclical uptrend

  Strengths

  Demand for AI servers and general-purpose server CPUs is driving rapid TAM growth, while widening supply gaps support price and earnings upgrades.

  Weaknesses

  Valuations and capacity-expansion expectations may already be partially reflected in share prices.

  Comparison

  Maintain Buy ratings on NYPCB, Kinsus, and ZDT, and Neutral on Unimicron.

  Risks

  AI server demand falls short, capacity is released faster than expected, and customers exert pricing pressure.

• Greater China Technology and Southeast Asian capacity

  Beneficiary of AI infrastructure and supply-chain diversification

  Strengths

  Expansion in Thailand and Vietnam is driven by AI infrastructure demand and customer diversification requirements, with customers willing to pay a premium for geographic diversification.

  Weaknesses

  Production costs in Thailand and Vietnam can be up to 20% higher than in mainland China, creating pressure from efficiency and materials tariffs.

  Comparison

  Compared with mainland Chinese capacity, Southeast Asian capacity is weaker on cost but more valuable for supply-chain resilience.

  Risks

  Unsustainable cost premiums, changes in customer orders, and geopolitical and trade-policy volatility.

• Japan's three major banks

  Earnings and target-price upgrades

  Strengths

  Strong capital-markets activity, growing loan demand, and positive contributions from BOJ rate hikes to net interest income.

  Weaknesses

  Sensitive to the interest-rate path and the economic cycle.

  Comparison

  Mizuho is identified as the preferred name due to its defensive business mix and strong positioning in corporate lending and GCIB.

  Risks

  Slowing loan demand, asset-quality pressure from rising rates, and a decline in capital-markets activity.

• AI infrastructure hardware

  Supported by structural demand

  Strengths

  Agentic AI is driving investment in local and edge infrastructure, while enterprise computing vendors such as Dell and HPE may benefit.

  Weaknesses

  High capital-expenditure intensity creates sensitivity to financing costs and investment returns.

  Comparison

  Compared with cloud-only deployment, local and edge deployment offers advantages in token costs, latency, and data sovereignty.

  Risks

  Overbuilding of AI infrastructure, enterprise budget cuts, and higher capital costs from rising interest rates.

• Laopu Gold

  Maintain Buy but lower target price

  Strengths

  Brand momentum remains healthy, lower gold procurement prices support gross margins, and valuation is approximately 7x 2026E P/E with a dividend yield of approximately 10%.

  Weaknesses

  A 20% decline in gold prices is suppressing sales growth, while second-quarter Tmall sales fell 63% year over year.

  Comparison

  The fixed-price model comes under sales pressure when gold prices decline, but gross margins benefit from lower procurement costs.

  Risks

  Continued volatility in gold prices, weak price-sensitive demand, and insufficient recovery in online sales.

• Global balanced portfolio

  Reduce concentration in single-equity exposure and strengthen diversification

  Strengths

  Real assets, style diversification, regional diversification, long-term call options, and alternative assets can balance innovation and inflation.

  Weaknesses

  Traditional stock-bond portfolios may come under pressure if AI earnings decline or inflation volatility rises.

  Comparison

  Outside the optimistic 'Goldilocks + AI boom' scenario, the report expects long-term equity returns to be below their long-term average.

  Risks

  Inflation volatility, fiscal risks, uncertainty over AI capital-expenditure returns, and earnings pressure on technology giants.

Key data

• China A-share viewMaintain OWReasons include more favorable cyclical earnings momentum and an undervaluation of diversification value for international investors.
• India NIFTY target26,500, June 2027 targetThe report states that following a 9% first-half decline, the target implies approximately 10% upside.
• Taiwan ABF TAM62% 2025-2028E CAGR, reaching US$33bnDemand is primarily driven by AI servers and general-purpose server CPUs.
• ABF supply-demand gap34% supply shortfall in 2027 and 51% supply shortfall in 2028The report expects LTA and spot prices to rise 10-20%+ quarter over quarter from 3Q26 through at least the end of 2027.
• ABF-related target pricesNYPCB NT$2,310; Kinsus NT$1,120; Unimicron NT$1,140; ZDT NT$8242027/28 earnings forecasts were also raised by 4-38%; maintain Buy ratings on NYPCB, Kinsus, and ZDT, and Neutral on Unimicron.
• Foxconn Industrial InternetBuy, 12-month target price Rmb107.2A survey of its Vietnam factories showed strong demand for AI servers and switches, while management remains positive on the AI capital-expenditure upcycle.
• Target prices for Japan's three major banksMUFG ¥3,900; SMFG ¥7,300; Mizuho ¥9,100Earnings forecasts and target prices were raised, supported by capital-markets activity, loan demand, and the impact of BOJ rate hikes.
• Ryohin KeikakuBuy, 12-month target price raised from ¥4,300 to ¥4,500Operating-profit forecasts for FY8/26-FY8/28 were raised by 8%/7%/5%, with growth in high-margin overseas businesses as the main driver.
• XiaomiBuy, 12-month target price HK$40The SkyNomad N70/N90 smart SUV filings are progressing, with 2026E/27E deliveries expected to reach 110k/240k; MiMo LLM processes 60-70 trillion tokens daily.
• Yaskawa ElectricBuy, 12-month target price ¥9,200First-quarter revenue and operating profit were below expectations, but orders of ¥163.8bn exceeded expectations, driven by semiconductor- and AI-related demand.
• BOC Hong KongBuy, 12-month target price HK$53.30Second-quarter 2026 net profit is expected to reach HK$10.5bn, up 2% year over year and down 16% quarter over quarter. Investors are focused on the 2026-2028 capital-return plan.
• Laopu GoldBuy, 12-month target price lowered from HK$1,108 to HK$6502026-2028 earnings forecasts were lowered by 9%-22%, but the report believes valuation and the approximately 10% dividend yield already reflect demand pressure.
• Bilibili12-month target price US$28.9/HK$226The report maintains a constructive view following the investor day, with advertising, the game pipeline, and AI monetization as the main supports.
• China NPBFIRMB800bnThe report estimates that the quota for new policy financial instruments this year could raise the real GDP level by approximately 0.5 percentage points in the base case, with the impact concentrated from late 2026 to early 2027.
• USD/CNY target6.50 over 12 monthsThe foreign-exchange section expects the renminbi to gradually strengthen, supported by strong exports and currency undervaluation.
• Potential Japanese capital repatriationApproximately US$80bnThe report believes that portfolio reallocations from overseas bonds into JGBs could provide structural support for the yen.

Impact & implications

For investment portfolios, the report supports more granular rotation within Asian equities: favoring China A-shares, Indian large-cap value stocks, and banks, tourism, refining, and utilities, while capturing structural opportunities from AI servers, ABF, PCBs, and Southeast Asian supply-chain expansion. For global asset allocation, simply chasing technology and equity gains may expose investors to valuation, earnings, and interest-rate repricing risks; investors should use real assets, styles, regions, options, and alternative assets to balance risk. For company research, AI demand is spreading from cloud service providers to enterprise and sovereign AI, while consumption, gold prices, the property chain, and macro interest rates will continue to create significant differentiation.

Risks

• If the AI capital-expenditure boom does not translate into earnings, it could weigh on returns from large technology stocks and equity markets.
• Inflation volatility and fiscal risks could weaken the performance of traditional balanced portfolios.
• If the Federal Reserve resumes rate hikes, it could pressure equities in the short term and raise funding costs for capital-intensive AI investment.
• If demand for ABF and AI servers falls short or capacity is released too quickly, expected price increases and earnings upgrades may fail to materialize.
• Chinese consumer sentiment, weather factors, and price competition may continue to weigh on consumer-goods companies' revenue and sales volumes.
• A pullback in gold prices could continue to suppress sales growth at fixed-price gold-consumption brands such as Laopu Gold.
• If foreign capital inflows and macroeconomic improvement in India are not sustained, the NIFTY's rebound potential may be limited.
• If Japanese capital repatriation or GPIF allocation adjustments are below expectations, structural support for the yen may be insufficient.

What to watch

• China A-share earnings momentum and the realization of alpha in Overweight sectors such as materials, capital goods, and insurance.
• The pace of earnings recovery and valuation repair among large-cap H-share internet companies.
• Foreign inflows into India, progress toward the NIFTY's 26,500 target, and rotation from growth to value and from mid-caps to large caps.
• The ABF industry's 2027-2028 supply-demand gap and quarterly increases in LTA and spot prices beginning in 3Q26.
• Order visibility and cost premiums from AI server, PCB, and networking-equipment capacity expansion in Thailand and Vietnam.
• The official launch of Xiaomi's SkyNomad N70/N90, delivery execution in 2026E/27E, and MiMo V3 inference-cost efficiency.
• Net interest income, loan demand, and the path of ROE upgrades at Japan's three major banks.
• BOC Hong Kong's 2026-2028 capital-return plan and special-dividend arrangements.
• Gold-price movements, Tmall sales recovery, gross margins, and dividend-yield stability at Laopu Gold.
• Federal Reserve policy expectations, US inflation data, the 6.50 USD/CNY target, and signals of Japanese capital repatriation.