A-share innovative drug concept stocks fluctuated higher during the session, with Lemei Pharmaceutical rising by more than 15%, and Zhaoyan New Drug, Medicilon, Chengdu Pioneer, Rongchang Bio and Nearshore Protein among the top gainers.

The recent decline in chip stocks reflects market uncertainty regarding the cost and pace of data center construction, rather than a sudden deterioration in the outlook. It also appears more like a risk-mitigation event than a substantial change in fundamentals. Increased congressional oversight may indeed intensify scrutiny of data center construction and AI regulation. However, unless widespread AI safety issues arise, we believe broad federal restrictions are likely to face legislative and presidential constraints. While state and local political resistance may delay, shift, or increase the cost of data center projects, this is unlikely to alter underlying demand. The proposed approximately 400 GW of capacity in the US already far exceeds our construction assumption of approximately 90 GW by 2030. Therefore, we believe regulation is more likely to reallocate and extend investment cycles than derail them, with power access, licensing approvals, financing, and enforcement capabilities increasingly becoming the dividing line between leaders and laggards. Underlying AI-related demand also remains strong. Recent earnings reports show accelerating cloud revenue growth and increasing orders for computing power. We forecast total AI capital expenditures to be $1 trillion in 2026, $1.4 trillion in 2027, and $1.5 trillion in 2028. For this sell-off to signal a sustained downturn in the AI investment cycle, we believe we need to see evidence of: slowing growth in AI-related revenue, weakening cloud utilization, or a failure of declining AI costs to generate sufficient new usage to absorb expanding capacity. Furthermore, we will reassess the outlook if improvements in algorithmic efficiency significantly reduce computing demands, larger investments fail to translate into corresponding increases in AI capabilities, or tighter financial conditions limit spending by large technology platforms and cutting-edge labs.

SoftBank Group is scheduled to release its second-quarter results on Tuesday. Here are some key points to watch: 1. Net Profit: Net profit for the three months ending in September is expected to plummet 98% year-on-year to ¥53.5 billion (approximately $337.6 million). In the same period last year, net profit was ¥2.502 trillion, primarily driven by billions of dollars in gains from its investment in OpenAI. 2. Vision Fund: SoftBank's Vision Fund business saw a sharp drop in first-quarter profit to ¥5.43 billion, compared to ¥451.39 billion in the same period last year. This was mainly dragged down by valuation losses at companies such as Symbotic, an AI-driven robotic warehouse automation company. Attention should be paid to whether there are signs of recovery in its technology fund business. 3. OpenAI Partnership Progress: As per the previously announced investment plan, the company has invested an additional $10 billion in OpenAI, bringing its total investment in the company to $64.6 billion, increasing its stake to approximately 13%. Any new developments in its OpenAI investment should be monitored. 4. Potential Acquisition Deals: SoftBank's $5.4 billion acquisition of ABB's robotics business has been stalled. Meanwhile, SoftBank is reportedly in preliminary talks with private equity investors to acquire Allied Universal, one of the world's largest private security companies. It remains to be seen whether management will make further statements regarding these potential deals.