Institutional Research

Bernstein cuts its December-quarter EPS estimate to $2.87 from $3.00, primarily because higher DRAM and NAND costs reduce iPhone gross margin. International pricing partially offsets the pressure, while Bernstein reiterates Outperform and its $370 target.

• Updated global-pricing analysis implies 40.4% iPhone gross margin, 390 bps below consensus.
• Apple gross margin is estimated at 46.2%, 50 bps below consensus, with EPS of $2.87, 2% below consensus.
• DRAM and NAND represent about 90% of the estimated $168 year-on-year increase in 256GB iPhone 18 Pro Max device cost.
• Premium models are expected to account for 70% of December-quarter iPhone units, supporting ASP but not fully offsetting component inflation.
• The report sees potentially greater margin pressure in the March quarter, but does not quantify it.

The report argues that rich US yield valuations and extreme duration underweight positioning create an asymmetry toward lower yields, though a reduction in energy volatility or worsening growth evidence is still needed to trigger a sustained rally. It pairs this view with differentiated curve views across North America, Europe, Japan and Australia.

• US 5y5y rates are close to one standard deviation above Goldman Sachs' model-implied fair value.
• Extreme real-money duration underweights have historically been associated with a 10bp decline in 10-year Treasury yields over the following three months.
• Markets price 90-95bp of Fed hikes over the next year, above Goldman Sachs economists' forecast; roughly one hike remains unexplained after accounting for volatility and hedge value.
• Goldman Sachs sees OAT underperformance as extreme but says stabilization may require global duration relief.
• The firm raises its YE2026 Australian 10-year yield forecast to 5.0% from 4.7%.

Goldman Sachs reports US$1.7bn of weekly foreign buying in Taiwan and US$2.9bn of Southbound inflows, even as hedge funds sold Asian equities month-to-date and unwound Korea AI exposure. Mutual funds increased relative exposure to Taiwan and India in August, though both remained underweight in key active-fund benchmarks.

• EM Asia ex-China received US$1.4bn of weekly foreign inflows, driven by Taiwan's US$1.7bn.
• Southbound Connect recorded US$2.9bn of weekly net buying, taking year-to-date inflows to US$56bn.
• Hedge funds were net sellers of Asian equities month-to-date through September 24, with Korea leading selling as AI longs were unwound.
• Taiwan hedge-fund net allocation rose to 6.8%, while Korea's declined to 4.8%.
• EM funds raised exposure most to India and Taiwan over the past month but remained most underweight Taiwan and Korea.

MXAPJ gained 1.1%, led by Korea, Taiwan and technology hardware, despite higher oil prices and US yields. Goldman Sachs continues to favor selected Asian markets and hard-tech sectors, with a 1,120 MXAPJ 12-month target.

• MXAPJ rose 1.1%; Korea gained 4% and Taiwan and Thailand each gained 2%, while Indonesia fell 4% and Hong Kong and China A each fell 2%.
• Tech Hardware & Semiconductors, Internet/Media and Health Care led; Software & Services, Telecom Services and Autos lagged.
• The Trump-Xi summit extended the tariff truce by two months to January 2027, but made no major progress on geopolitics or AI governance.
• Goldman Sachs targets MXAPJ at 1,120 from 891, implying 26% price upside and 29% total return.
• The firm is overweight Korea, Taiwan, China A and Japan, and overweight Capital Goods, Banks, Health Care and Tech Hardware & Semiconductors.

Nomura expects September payroll growth to remain solid and unemployment to fall to 4.0%, reinforcing its view that the Fed will remain focused on inflation. It forecasts a pause in October followed by a final 25bp rate increase in December.

• September nonfarm payrolls are forecast to rise 130k after a 162k gain in August, with August likely revised higher.
• Nomura expects the unemployment rate to fall to 4.0% from 4.1%, supported by subdued layoffs, improving job openings and seasonal effects.
• The annual PCE update is expected to lower July core PCE inflation by about 15bp to 3.19%.
• Q3 GDP tracking was raised to 4.1% annualized from 4.0%, supported by capex and resilient consumption.
• Nomura expects the Fed to pause in October and deliver one final 25bp hike in December.

Bernstein finds that high valuations, rising long-term rates and project-level risks leave Indian renewable stocks requiring sustained returns and favorable exit multiples to achieve a 10% INR CAGR over 10 years. The report contrasts this with an estimated 8.4% INR return from a US 30-year Treasury after assumed currency depreciation.

• Typical Indian solar-wind projects generate roughly 9-10% project IRRs and 12-14% equity IRRs.
• A US 30-year government bond yields 5.44%, equivalent to about 8.4% in INR after a 3% currency-depreciation assumption.
• Indian renewable players trade at about 4x P/B, while Bernstein's 10-year return analysis assumes a 3x P/B entry multiple.
• A 100bp increase in interest rates reduces equity IRR by 160bp; 1% uncompensated curtailment reduces it by about 40bp.

UBS argues that AI-related investment and wealth effects are sustaining growth while rate-sensitive sectors are weak, making r-star an unreliable anchor for the FOMC. It expects inflation revisions to lower measured core PCE inflation and forecasts a 95K September payroll gain.

• UBS estimates the AI impulse accounts for more than all real GDP growth over the last four quarters, while the rest of the economy contracted 0.7%.
• The annual national-accounts revision could lower August core PCE inflation by about 0.18 percentage point under new methods.
• UBS forecasts 95K September nonfarm payroll growth, a 4.08% unemployment rate, and 0.21% monthly average hourly earnings growth.
• The institution removed its projected June 2027 rate cut and now expects two further rate hikes this year followed by a prolonged hold.

Second-quarter revenue beat Goldman Sachs' estimate as enterprise and government demand expanded, but a sharp gross-margin decline drove an earnings miss. The firm cut 2026-28E earnings and both share-class targets while maintaining Neutral.

• 2Q26 revenue rose 12% YoY and 23% QoQ to Rmb43.0bn, 8% above Goldman Sachs' estimate.
• Enterprise and government revenue increased 44% YoY in 1H26.
• 2Q26 gross margin fell to 23.2%, 5.1 percentage points below estimate and 7.7 percentage points lower YoY.
• Net income was Rmb1.44bn, down 45% YoY and 11% below estimate.
• 2026-28E revenue estimates increased 3%/5%/7%, but net-income estimates fell 6%/10%/2%.
• The H-share target fell 13% to HK$32.60 and the A-share target fell 13% to Rmb50.6.

Goldman Sachs reports that TAIEX/MXTW rose 1.8%/1.9%, with semiconductor and hardware gains driving a record TAIEX close above 48,000. Strong earnings and sales data underpin the market, though elevated valuations, concentrated technology leadership, and cross-strait risk remain important context.

• TAIEX/MXTW gained 1.8%/1.9%, outperforming MXAPJ by 0.6 percentage points.
• Other semiconductors rose 5.0% and technology hardware gained 3.5%, while property fell 4.0% and banks fell 2.0%.
• QFIIs bought US$1.7 billion of cash equities, including US$1.4 billion in ex-TSMC technology.
• Listed-company August revenue grew 55% year on year and 2Q26 earnings grew 174% year on year.
• Forward 12-month/24-month P/E stood at 18.7x/14.8x, or 1.5/0.7 standard deviations above historical levels.

The report expects AVC's monthly revenue to rise sequentially through December 2026 as GPU and ASIC AI-server ramps increase liquid-cooling demand. Goldman Sachs raises earnings estimates and its 12-month target price to NT$4,513 from NT$3,986.

• 3Q26E and 4Q26E revenue are forecast to increase 18% and 27% quarter on quarter.
• December 2026 monthly revenue is forecast at NT$27,896 million, up 16% month on month and 100% year on year.
• 2026-28E net-income estimates rise by 1%, 5%, and 17%, respectively.
• The 12-month target price rises to NT$4,513 from NT$3,986, based on 30.3x 2027E EPS.
• Goldman Sachs forecasts 39% net-income CAGR for 2026-28E.