Duan Yongping and Jinglin Sold, While Hillhouse Bought

Prominent investors and private equity giants have recently disclosed their U.S. stock holdings in quick succession.

Recently, HHLR Advisors (hereinafter referred to as “HHLR”), the fund management platform under Hillhouse focused on secondary market investments, released its latest U.S. stock holdings. The data shows that as of the end of the second quarter, the total market value of HHLR’s U.S. stock holdings was approximately $832 million, comprising 35 stocks, with biotechnology continuing to occupy a significant position in the portfolio. In terms of trading activities, HHLR increased its holdings in semiconductor and optical communication-related targets such as NVIDIA, Coherent, Corning, and Lumentum in the second quarter.

Notably, according to public disclosures, overseas funds under hundred-billion-yuan private equity firms such as Jinglin Asset Management and Oriental Harbor Capital Management, as well as funds managed by renowned investor Duan Yongping, all reduced their holdings in NVIDIA during the second quarter. In the words of industry insiders, after the extreme performance of the AI sector in the earlier period, institutional views on investment opportunities across various segments of the AI industry are gradually diverging.

Heavyweight Positions in Biotechnology

Public disclosure information shows that as of the end of the second quarter, HHLR’s top five holdings were Legend Biotech, Futu Holdings, ArriVent, Marvell Technology, and Vipshop. Compared to the end of the first quarter, Legend Biotech rose to become the largest holding.

In terms of industry distribution, the biotechnology sector continues to hold a significant position in HHLR’s U.S. stock portfolio, with the market value of related holdings accounting for more than 50% of the total U.S. portfolio. Regarding additions, Alamar Biosciences and Odyssey Therapeutics appeared in HHLR’s U.S. stock holdings for the first time. It is reported that both companies were previously invested in by Hillhouse in the primary market; after their IPOs, they were transferred to public market holdings and included in the disclosure.

Notably, as of the end of the second quarter, BeiGene, a “long-term favorite” of Hillhouse, disappeared from its U.S. stock holdings list. However, reporters learned through interviews that Form 13F only reflects holdings of specific securities required to be reported under U.S. regulatory rules and does not represent Hillhouse’s entire investment portfolio. Therefore, whether it has completely liquidated its position in BeiGene cannot be determined solely from its U.S. stock holdings.

Additionally, among the top five heavyweight stocks, HHLR increased its holdings in Futu Holdings and Vipshop in the second quarter, while also adjusting its positions in some Chinese concept stocks such as Pinduoduo, Alibaba, and Beike.

Preference for AI Infrastructure

In terms of portfolio adjustments in the technology sector, Hillhouse increased its positions in several AI infrastructure targets in the second quarter of this year.

According to publicly disclosed data, HHLR continued to hold Marvell Technology in the second quarter and increased its stakes in semiconductor and optical communication-related targets such as NVIDIA, Coherent, Corning, and Lumentum. From the distribution of holdings at the end of the second quarter, HHLR’s U.S. portfolio covered leading stocks in AI infrastructure segments such as computing chips, high-speed interconnects, and optical communications.

As early as the first quarter of this year, HHLR added several semiconductor and optical communication-related targets, including NVIDIA, Intel, Coherent, Corning, and Lumentum, covering segments such as computing power, chips, data center interconnects, optical communications, and optical materials.

Interestingly, there was a clear divergence in operations among prominent private equity firms regarding NVIDIA in the second quarter.

As of the end of the second quarter, Gaoyi Asset Management held 80,000 shares of NVIDIA, a reduction of more than 70% compared to the end of the first quarter. During the same period, Jinglin Asset Management completely cleared its position in NVIDIA, which was among its top ten heavyweight stocks at the end of the first quarter. Oriental Harbor Capital Management also reduced its NVIDIA holdings by approximately 15.7%. Furthermore, H&H International Investment, managed by Duan Yongping, significantly reduced its holdings by 7.5631 million shares, resulting in a 54.63% decrease in share count.

Divergence Gradually Emerging

The different operations by private equity giants on NVIDIA reflect the current divergence among institutions regarding opportunities in the technology sector.

Yude Investment admitted that the company recently re-examined the development of the AI industry, believing that while the AI industry trend remains unchanged, investment is entering an era of divergence. Specifically, with the rapid progress of Chinese large models becoming strong global competitors, the simple phase of focusing solely on the Annual Recurring Revenue (ARR) of a single leading large model has passed. The market is now paying more attention to the evolution of business models driven by massive capital expenditures and real profitability.

Yude Investment stated that in the rebalancing towards AI, domestic and international internet and cloud computing giants offer prominent cost-performance ratios. After this round of adjustments, the valuations of pure hardware computing power targets, which were previously overly hyped, have declined. Meanwhile, the valuation attractiveness of leading cloud vendors with strong platform ecosystems, stable cash flows, and certainty in AI commercialization is increasing. Whether it is Microsoft, Google, and Amazon overseas, or Alibaba and Tencent domestically, their cloud computing businesses have benefited from the explosion in AI demand, and their platform values have been significantly enhanced by the promotion of AI. In the process of the AI industry evolving from “computing power-driven” to “application-driven,” these platform-type companies are expected to be the core beneficiaries.

On the other hand, Zhiyu Zhishan Investment believes that since the dawn of the artificial intelligence era in 2023, the ratio of the total market value of key AI computing power companies tracked by the firm to their capital expenditures (Capex) for the following year has remained at around 10 times. This implies that, from the perspective of industrial investment, the self-reinforcing degree of the so-called AI bubble has far from reached a dangerous state. At the same time, the forward price-to-earnings ratio percentile of the S&P 500 does not exhibit bubble characteristics. Specifically, due to the evident release of profits, the certainty on the computing power side is relatively strong.

Source: Shanghai Securities News

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