Goldman Sachs Upgrades Beike to Buy; Raises Global Semiconductor Equipment Spending Forecast

Overview

This report is part of Goldman Sachs' 'The 720' daily series, covering latest developments and rating adjustments across global technology, real estate, finance, and consumer sectors. Key highlights include upgrading KE Holdings (BEKE) rating to 'Buy', viewing it as benefiting from existing home market recovery and operational efficiency gains; significantly raising global semiconductor wafer fabrication equipment (WFE) spending forecasts for 2026-2028, while maintaining a positive outlook on Applied Materials, Tokyo Electron, and Chinese domestic equipment providers (AMEC, Naura); updating Q1 performance reviews and earnings forecasts for several tech companies including Cambricon, GigaDevice, Shin-Etsu Chemical, and Inspur. Additionally, the report covers rating and target price adjustments for National Australia Bank, OCBC Bank, Weichai Power, and Ceres Power, along with thematic outlooks on Chinese hotels, Indian consumption, and the Australian gaming industry.

Core views

In Real Estate and Internet Services, the report upgrades KE Holdings' rating from 'Neutral' to 'Buy', raising the 12-month target price from $19 USD / HK$50 to $21 USD / HK$55. Drivers include stronger-than-expected recovery in existing home transactions (sales volume in April for 39 tracked cities rose 35% YoY) and a narrowing decline in new home sales. The company optimized its workforce (number of Lianjia agents down 22% from peak), expecting to reduce fixed costs by RMB 900 million and non-GAAP operating expenses by RMB 1 billion in 2026, thereby releasing profitability and driving valuation re-rating. In the Semiconductor Equipment sector, driven by persistent constraints in memory and advanced logic chip capacity, Goldman Sachs raised global WFE spending forecasts for 2026/2027/2028 from $132B / $160B / $174B to $141B / $186B / $208B. Although hyperscale cloud providers may scale back AI spending, semiconductor capex stocks still have upside potential. On relative value, Applied Materials and Tokyo Electron offer the most attractive risk-reward profiles; in the Chinese market, we maintain 'Buy' ratings on AMEC (target price ¥471) and Naura (target price ¥638), highlighting their valuation attractiveness and domestic growth drivers. Tech Company Performance and Rating Adjustments: Cambricon reported Q1 revenue up 53% QoQ to ¥2.9 billion, beating estimates by 61%, with contract liabilities rising to ¥396 million indicating strong order books; net profit forecasts were raised by 30-68%, and target price increased to ¥2406. For GigaDevice, strong DRAM pricing and an upgraded NOR Flash portfolio drove Q1 net profit surge of 523% YoY to ¥1.46 billion, with gross margins reaching 57.1%; 2026-2028 earnings forecasts were raised 36-60%, and the target price rose to ¥391. Shin-Etsu's core business matched expectations in Q1, benefiting from the AI/HPC upcycle; Q2 revenue is expected to grow 22% QoQ, with the target price raised to NT$15,000. Conversely, Inspur saw its rating downgraded from 'Buy' to 'Neutral' as AI server ASPs declined due to a shift from global high-end GPUs to lower-cost local chips, and a higher mix of cloud service providers compressed mixed gross margins (expected to remain at 5-6%); the target price was cut to ¥76.5. Other Sector Highlights: National Australia Bank (NAB) faces a 'triple challenge' of economic slowdown, cost pressures, and rising credit costs; the 'Sell' rating is maintained with the target price lowered to A$38.5. OCBC Bank plans to acquire HSBC Indonesia International Wealth and Priority Banking businesses, expecting group AUM to rise approximately 1.9% post-completion; the 'Buy' rating is maintained. Weichai Power benefits from accelerating gigawatt-level shipments of gas generator sets, shifting its investment narrative towards AI data center power generation; H-share/A-share target prices are raised to HK$46 / RMB¥42 respectively. Ceres Power benefits from accelerated adoption of fuel cells in data centers, particularly the potential licensing opportunity in the US market; the target price is raised to 930 pence.

Analysis framework

The report utilizes an integrated top-down and bottom-up analytical framework. At the macro and industry levels, it assesses sector cyclicality by tracking key capital expenditure indicators (such as WFE spending) and supply-demand imbalances (such as memory capacity constraints). At the company level, it focuses on marginal changes in financial data (e.g., QoQ revenue growth, gross margin movements, contract liabilities reflecting order intake) and operational efficiency improvements (e.g., cost savings from headcount optimization). For rating adjustments, the institution combines valuations (e.g., EV/EBITDA multiples), magnitude of earnings revisions, and specific catalysts (e.g., policy direction, technological iteration, M&A events) for comprehensive assessment. For example, the upgrade on Beike is based on the widening spread between recovering volume-price data and rigidly declining costs; the downgrade on Inspur follows the logic that product mix changes will exert long-term pressure on gross margins.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Semiconductor Equipment Spending Forecast

  By analyzing the relationship between downstream chip (memory, logic) capacity constraints and upstream equipment demand, projecting wafer fab equipment (WFE) spending volumes to gauge the performance elasticity of equipment vendors.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Operational Efficiency and Cost Rigidity Analysis

  Assesses the profit elasticity generated by reducing fixed costs (such as headcount optimization) in the context of revenue recovery, examining how operating leverage effects drive valuation re-rating.

• Valuation methodsDCF Cash Flow Discounting

  Probability-Weighted Valuation Framework

  When significant uncertainty or upside options exist (such as Ceres Power's US licensing opportunity), combine base scenarios and upside scenarios using DCF and multiple methods to determine the probability-weighted average target price.

Asset mapping & comparison

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

• KE Holdings (BEKE.US)

  Benefits from recovery in existing home transactions and operational efficiency gains

  Strengths

  Leading market share, enhanced cost control capabilities, positive growth in existing home GTV

  Weaknesses

  New home market still faces downward pressure

  Comparison

  Stronger platform effect and cost resilience compared to peers

  Risks

  Real estate market recovery weaker than expected

• Cambricon (寒武纪)

  Benefits from AI infrastructure investment and localization trends

  Strengths

  Strong order book, government support for local AI chips

  Comparison

  Sought-after scarcity in the Chinese AI chip sector

  Risks

  Technology iteration risks, supply chain restrictions

• Inspur (浪潮信息)

  Hurt by margin pressure on AI servers

  Strengths

  Leading market share in AI servers

  Weaknesses

  Low gross margins with limited improvement potential, reliance on high-end GPU supply

  Comparison

  Weaker bargaining power in the assembly segment compared to pure software or chip vendors

  Risks

  Geopolitics causing supply chain disruptions, price wars

• National Australia Bank (NAB.AX)

  Hurt by economic slowdown and rising credit costs

  Weaknesses

  High beta attributes, facing cost pressures and bad debt risks

  Comparison

  Weakest stock performance among the four major Australian banks

  Risks

  Australian economic hard landing, rising unemployment

Key data

• 2026E Global WFE Spending Forecast$141 BillionRaised from $132B, driven by memory and advanced logic capacity constraints
• KE Holdings Target PriceUS$21 / HK$55Raised from US$19/HK$50, rating upgraded to Buy
• Cambricon Q1 RevenueRMB 2.9 BillionUp 53% QoQ, beating estimates by 61%
• GigaDevice Q1 Net ProfitRMB 1.46 BillionUp 523% YoY, Gross Margin 57.1%
• Inspur Gross Margin Forecast5-6%Expected to remain low through 2028 due to product mix changes

Impact & implications

The report suggests that the upward revision in capex for the semiconductor equipment sector implies a longer period of prosperity for leading firms and Chinese domestic substitution manufacturers, especially those with technical breakthroughs and import replacement logic. The upgrade of BEKE hints that the Chinese real estate agency sector may witness optimization of its profitability model and valuation repair in the era of existing homes. Conversely, the AI server assembly segment faces margin compression due to intensified competition and technology route shifts (from high-end GPUs to local chips), urging investors to be wary of deteriorating earnings quality in related companies. Regarding bank stocks, the negative impact of macroeconomic slowdown on asset quality and net interest margins is becoming evident; caution is advised regarding high-beta bank stocks.

Risks

• Global macroeconomic slowdown exceeding expectations, impacting capital expenditure and consumer demand
• Escalation of geopolitical tensions leading to disruptions in the semiconductor supply chain
• Weak recovery in the real estate market, rendering existing home transaction growth unsustainable
• Slowing pace of AI technology iteration, leading to returns on related hardware investments falling short of expectations
• Bank credit costs rising faster than expected, eroding profits

What to watch

• Whether actual global semiconductor wafer fab equipment (WFE) spending aligns with the revised forecasts
• Whether KE Holdings' existing home GTV growth rate can continue turning positive in Q2 2026
• Order delivery status and gross margin changes for Cambricon and GigaDevice in subsequent quarters
• Extent of asset quality deterioration at National Australia Bank and other financial institutions
• Progress of local chip substitution for global high-end GPUs in the AI server market and its impact on profit margins