Zhitong Hong Kong Stock Analysis | Meta sells excess computing power, AI is not pessimistic, pharmaceutical stocks strengthen collectively with multiple catalysts

[Market Dissection]

Unexpectedly, Meta's actions have caused a stir in the global AI sector, leading to a significant drop in A-shares, while Hong Kong stocks remained relatively unaffected, with the Hang Seng Index actually rising by 0.76% due to its low "tech" content.

On July 1st, U.S. time, it was reported that Meta is preparing to sell excess AI computing power to external clients. Previously, Meta announced that its capital expenditures would reach $145 billion this year. Additionally, there are reports that OpenAI's optimization plan will reduce inference operating costs by over 50%. With AI reaching a high point, there has been an increase in bearish sentiment, directly exacerbating concerns about overheating investments in AI. During trading, SanDisk and CoreWeave fell over 10%, with South Korea being particularly hard hit; in the afternoon, the KOSPI index dropped by 8%, and SK Hynix's stock price further declined by 14%. SK Hynix evaporated $160 billion in market value in a single day (approximately 100 billion RMB), bringing its total market value down to about $1 trillion. Domestically, as orders are closely tied to the U.S. and South Korea, the impact is unavoidable, with all tech stocks in Hong Kong generally falling over 10%.

Meta's move is essentially an adjustment to alleviate financial pressure; didn't Musk also rent XAI to Anthropic and Google? As for the issue of excess computing power, one should consider how much computing power is needed for training and inference. It will only increase, not decrease, as AI penetration is just beginning. Future technological development will be built on computing power, unless there is no further development. Looking at whether Meta will adjust its Capex, this is dynamic and will require the second-quarter report for answers, but procurement for high-end computing power will continue. Other giants: NVIDIA provides financial backing for emerging cloud providers by leasing GPU computing power to solve their financing difficulties. OpenAI has offered 5% for the government to hold directly, hoping for government endorsement to continue financing and maintain operations, similar to Intel. In summary, U.S. giants are more concerned because if a giant falls, it could lead to problems for the entire U.S. stock market and the national economy. Looking domestically, the pace of increasing investment in AI will not stagnate, and domestic substitution will continue firmly. Therefore, the decline in technology stocks is merely a release after excessive gains and overcrowding, with opportunities still ahead.

On July 1st, newly appointed Federal Reserve Chairman Waller stated at the European Central Bank's Global Central Bank Forum that U.S. inflation expectations and inflationary risks have both declined in the past four weeks. Coupled with the weaker-than-expected U.S. June S&P Global Manufacturing PMI final value and ISM Manufacturing PMI, market expectations for a rate hike by the Federal Reserve in September have significantly weakened, with spot gold recovering to $4,100 on Wednesday. China Gold International (02099) and Chifeng Jilong Gold Mining (06693) both rose over 10%. For the future trend of gold, one can refer to the World Gold Council's July 1st release of the "2026 Global Gold Market Mid-Year Outlook": barring any significant fundamental changes, gold is likely to fluctuate within a range of ±5% around $4,100 per ounce in the second half of the year. The feasibility of gold prices entering an upward channel again exists, but clear and strong catalysts are needed Currently, the only sector that can support technology is pharmaceuticals. BD continues to catalyze: CSPC Pharmaceutical Group (300765.SH): its holding subsidiary, Jushi Biopharma, has signed a collaboration, option, and licensing agreement with AstraZeneca, which will pay Jushi Biopharma an upfront payment of $30 million. CSPC Pharmaceutical Group (01093) rose over 8%; similar stocks such as InnoCare Pharma-B (09606) surged over 15%; other stocks like Rongchang Bio-B (09995), Kelun-Biotech-B (06990), Innovent Biologics (01801), and CanSino Biologics (09926) all rose over 7%. The National Medical Products Administration released an announcement on June 30 regarding the application for marketing authorization of chemical raw materials, clarifying that four categories of chemical raw material applications can be included in the priority review and approval process, which will officially be implemented starting August 1, 2026. The current approval process in China stipulates that the review period for priority review products is generally 130 working days, while the conventional review path for chemical raw materials typically exceeds 200 working days. Federal Pharmaceutical (03933), Kangzhe Pharmaceutical (00867), and Sihuan Pharmaceutical (02096) all rose over 9%.

The catalyst for robotics still looks to Musk, who recently visited the production line of Optimus. herbertong shared his interview content with Lars (Tesla Vice President): the automated production line has been built in Germany, and the first line has arrived and will be installed. On-site acceptance testing for other lines is still ongoing in Germany. Theoretically, after delivery from Germany, they can start a production line within a week. Optimus has about 40 sub-production lines. This aligns with the launch of Optimus production in August. Additionally, the China Securities Regulatory Commission has approved Yushu Technology Co., Ltd. for its initial public offering registration. The T chain mainly includes Sanhua Intelligent Control (02050), Minth Group (00425), and Lingyi iTech (01688); domestic robotics mainly focuses on Estun (02715), SOTY (02498), Horizon Robotics-W (09660), and Hesai-W (02525), among others. Jinli Permanent Magnet (06680) expects to achieve a net profit attributable to the parent company of 400 million to 460 million yuan in the first half of the year, a year-on-year increase of 31.17% to 50.84%. The key is that its revenue in the robotics and industrial servo motor sectors has grown by about 90% year-on-year, and small batch deliveries of embodied robot motor rotor products have already been made. Today it rose over 12%.

Starting July 1, two mandatory national standards for electric vehicles, "Safety Requirements for Electric Vehicles" and "Safety Requirements for Power Storage Batteries for Electric Vehicles," led by the Ministry of Industry and Information Technology, will be officially implemented nationwide. These two new regulations, referred to in the industry as "the strictest ever," set a red line: batteries must "not catch fire or explode," and vehicles must be equipped with "physical disconnection." Leading companies such as CATL (03750), BYD (01211), and Geely (00175) have already submitted their compliance ahead of time, with "exceeding national standards" becoming the main battleground for the new round of industry competition. Those that do not meet the requirements will be eliminated In terms of sales, the sales figures for new energy vehicles in June 2026 have been gradually released, meeting market expectations. BYD (01211) sold 403,472 vehicles in June, ranking first, with a year-on-year and month-on-month growth of 5%, and surged over 8% in just a few days; Geely Automobile (00175) saw a year-on-year increase of 2% and a month-on-month increase of 1% in total passenger car wholesale volume to 240,800 vehicles in June; among them, the wholesale volume of new energy vehicles increased by 32% year-on-year and 21% month-on-month to 161,400 vehicles. Today it rose nearly 3%; XPeng (09868) delivered 40,126 vehicles in June, a year-on-year increase of 16% and a month-on-month increase of 25%; its second-quarter delivery volume was 103,300 vehicles, in line with the guidance of 100,000 to 106,000 vehicles. Today it rose over 2%.

Goldman Sachs has turned its attention to China's pork market. On June 30, Goldman Sachs analysts Trina Chen and others pointed out in a report that "with almost all producers experiencing negative cash profits, the supply response will accelerate, including a reduction in breeding sows, policy promotion, and more production capacity exiting; we maintain our judgment that pork prices will recover in the second half of 2026." Their baseline assumption is that the spot price of live pigs will rise from the current approximately 9.4 yuan/kg to 15.0 yuan/kg in the second half of the year. Domestic institutional research reports indicate that the supply pressure of live pigs may gradually decrease in the second half of 2026, considering the support from the peak demand season, and that Q2 2026 may be the lowest point for pork prices in this cycle, with a turning point expected in the second half of the year. Cost advantages are a key consideration for pig farming companies, and the current sector valuation is at its lowest level in nearly 10 years, highlighting the value of positioning. Dekang Agriculture (02419), Muyuan Foods (02714), and COFCO Joycome (01610) have all rebounded from the bottom.

In May, the United States added 172,000 non-farm jobs, while the unemployment rate remained unchanged at 4.3% for the third consecutive month. The hot data clearly became one of the reasons for the rapid rise in expectations for a Federal Reserve interest rate hike at that time. Looking ahead to the non-farm payrolls to be released tonight for June, media surveys show that economists generally expect an increase of 113,000 non-farm jobs in June, which would be favorable for the market if it comes in lower than expected. Of course, the unemployment rate will also be a key factor.

【Sector Focus】

On July 2, lithography machine giant ASML announced an upward revision of its full-year revenue guidance, primarily due to the continued growth in demand for advanced lithography equipment related to AI chip manufacturing. Leading global foundries such as TSMC and Samsung are accelerating the introduction of high numerical aperture EUV lithography machines to meet the demand for AI accelerators, further enhancing the certainty of capacity expansion for advanced processes of 3nm and below.

On July 2, Interface News learned exclusively that Kingsoft Cloud will accelerate the construction of GPU computing clusters in the second half of the year to meet the explosive growth in computing power demand from major clients. Among them, Xiaomi's demand for Kingsoft Cloud's GPU computing power has been upgraded from a ten-thousand-card cluster to a super-large-scale computing cluster, with the related investment budget increasing from nearly 4 billion yuan to over 10 billion yuan. Additionally, Alibaba's large model team has signed a five-year computing power leasing contract with Kingsoft Cloud, involving more than 3,000 eight-card GPU servers. Based on the monthly rental price at the time of signing, the total monthly revenue after full delivery is estimated to be around 300 million yuan, with annual revenue exceeding 4 billion yuan From the above, it can be seen that AI demand remains strong, with related stocks: Semiconductor Manufacturing International Corporation (00981), Hua Hong Semiconductor (01347), Bairun Technology (06082), ASMPT (00522), Kingsoft Cloud (03896).

【Stock Picking】

Kelong Botai Biotech (06990): ASCO Phase III heavyweight data continues to catalyze pipeline advancement smoothly

The company's core product sac-TMT combined with Pembrolizumab for first-line treatment of PD-L1 positive NSCLC is continuously generating buzz with the Phase III OptiTROP-Lung05 study data. This study is the world's first ADC combined with immunotherapy to achieve positive Phase III results in NSCLC, with a PFS risk ratio of 0.35 and a 12-month PFS rate of 62.4%, far exceeding the control group's 29.0%.

Commentary: The company reached a pipeline collaboration with overseas pharmaceutical giant Merck in 2022, becoming a representative product for Chinese innovative drugs authorized for overseas markets. The global clinical advancement of sac-TMT is proceeding smoothly, with the potential to be the best in its class globally, and it is about to enter the commercialization stage overseas, opening up market opportunities in collaboration with Merck. The market's confidence in sac-TMT's overseas expansion is primarily catalyzed by three factors: 1) Positive clinical data enhances approval probabilities and expected market share; 2) The scale of the global Phase III study initiated by Merck exceeded expectations, strengthening market confidence; 3) A renewed understanding of the overall capability of Chinese innovative drugs to enter overseas markets.

The sales of the core product Pembrolizumab reached $31.7 billion. Pembrolizumab will face patent expiration in the U.S. in 2028. To address the patent cliff, Merck has laid out a rich pipeline in five major areas: oncology, cardiovascular, respiratory, anti-infection, and ophthalmology. In the oncology field, it is expected to contribute $25 billion in sales by the mid-2030s, with over half of the sales coming from ADC pipelines under research. Merck currently has a total of 27 registered clinical studies for ADCs underway, of which 17 are Phase III clinical studies for sac-TMT. In terms of investment in Phase III clinical studies, sac-TMT is a core product in Merck's oncology pipeline. For sac-TMT, Merck has adopted a comprehensive and detailed clinical trial path based on Kelong Botai Biotech's early research data in China, launching numerous Phase III studies for blank indications. With the continuous accumulation of research data from China, the BIC status of sac-TMT is becoming increasingly clear. Coupled with Merck's rapid advancement of numerous registered clinical studies globally, as data matures, the peak overseas sales of sac-TMT are expected to reach $15 billion.

The company's partner Windward Bio has completed the administration of the first batch of patients in the Phase II study of the ultra-long-acting anti-TSLP antibody SKB378/WIN378 for the treatment of COPD, with smooth pipeline advancement. Kelong Botai Biotech is expected to achieve profitability by 2027, with the clinical value of the core product sac-TMT expected to significantly increase in 2026, and approval in the U.S. anticipated in 2027