Bank of America Asia Fund Managers Survey: 80% of investors are waiting for AI commercialization to further realize that Taiwan will become one of the most beneficial markets in the next phase

The Zhitong Finance App learned that Bank of America's Asian fund manager survey in September showed that after AI transactions continued to heat up, the focus of Asian investors was gradually shifting from “the scale of AI investment” to “whether AI can actually generate revenue.” Up to 80% of investors surveyed said they would like to see more clear evidence of AI commercialization or revenue monetization before further increasing their AI-related stock holdings. Meanwhile, the Bank of Japan's policy normalization is currently receiving the most attention in the Japanese stock market. Nearly 80% of investors expect the Bank of Japan to raise interest rates in September.

The survey was conducted from September 4 to 10, and a total of 190 respondents with assets under management totaling $512 billion participated. Among them, 170 investors managing 470 billion US dollars of assets answered questions from the global fund manager survey, and 87 investors with assets of 21 billion US dollars participated in the regional survey.

AI investment logic has changed: 80% of investors want to see commercialization results

AI is still one of the most important investment themes in the Asian market, but fund managers' requirements for AI stocks are increasing markedly.

According to the Bank of America survey, when asked “what factors would best enhance confidence to further increase AI-related stock holdings,” 80% of investors chose “evidence of AI commercialization/revenue generation”, a further sharp increase from 64% in August. In contrast, 15% of investors chose a “further increase in profit forecasts,” and the percentage that “lower interest rates” can increase investment confidence is 5%.

This means that after experiencing the wave of AI capital expenditure and infrastructure investment over the past few years, investors are increasingly concerned about whether the large amount of AI capital previously invested can be converted into actual revenue and profit.

At the same time, investors are increasingly convinced that the benefits brought by AI are already reflected in stock prices. According to the September survey, 55% of fund managers believe that the positive impact of AI on stocks has been “basically reasonable pricing” or “beyond full pricing,” which is significantly higher than 37% in August. Among them, 50% believe that the benefits of AI are basically reasonably reflected in the price, and 5% believe that they have exceeded full pricing.

In this context, there have also been significant changes in how investors defend against the downside risks of AI transactions. In September, 25% of investors chose to switch to defensive industries as the main hedging method for AI trading, up from 18% in August; at the same time, the proportion choosing to switch from AI to value stocks and cyclical stocks dropped sharply to 5% from 41% in August. Another 15% of investors said they would not hedge and continue to overallocate AI.

Software and platforms surpass electricity and energy to become the most popular link in the AI industry chain

Funding preferences within the AI industry chain are also changing.

According to the Bank of America survey, when fund managers were asked which link in the AI value chain has the best risk return in the next 12 months, software and platforms jumped to first place with an approval rating of 25%, a sharp increase from 9% in August, and surpassing the previously most popular electricity and energy sectors.

Memory chips ranked second with a 20% approval rating; connectivity and networking, data center infrastructure, and power and energy each received 15% approval ratings. The approval rating for electricity and energy fell to 15% from 23% in August.

This change shows that as investment in AI infrastructure matures, investors are paying more attention to the realization of value in the next stage of the AI industry chain, that is, whether the computing power and data centers previously invested on a large scale can eventually generate actual commercial returns through software, platforms, and application layers.

Confidence in the semiconductor cycle has recovered, and Taiwan and the US are tied as the biggest beneficiary market in the next phase of AI

Fund managers' confidence in the semiconductor cycle has recovered from last month, but it is still below the previous high.

According to the survey, it is expected that the semiconductor cycle represented by exports from South Korea and Taiwan will further strengthen in the next 12 months, and the net ratio will rise to 35% in September, compared to 60% in July.

On the question of “which market will benefit the most from the next AI cycle,” Taiwan and the US both received 35% approval ratings and tied for first place. Among them, the approval rating of the United States rose significantly from 18% in August, while Taiwan rose from 27% to 35%, and Japan ranked third with an approval rating of 25%.

It is worth noting that within the Chinese market, AI and semiconductors are still the most popular topics for fund managers. According to the survey, 55% of investors ranked AI/semiconductors as one of their favorite investment topics in the Chinese market, significantly ahead of 25% of state-owned enterprises and 15% of high-dividend stocks.

Asian companies' profit expectations improved further

Corporate profits became another relatively positive sign in the September survey.

According to the survey, 55% of net fund managers expect corporate profits in Asia Pacific excluding Japan to improve in the next 12 months, up from 45% in August. Meanwhile, previous concerns about market profit forecasts being too optimistic have been reversed. Bank of America believes that this means that investors now see more room for corporate profits to exceed expectations, which is in line with the recent trend of improving the ratio of up/down profit forecasts.

At the macro level, economic growth expectations for the global and Asia-Pacific regions other than Japan cooled slightly in September due to the market's renewed focus on the possibility of further policy tightening by the Federal Reserve. Inflation expectations remain stable overall, and 25% of net investors expect inflation in the Asia-Pacific region excluding Japan to rise in the next 12 months.

Nearly 80% of investors are betting on the Bank of Japan's interest rate hike in September

The Japanese market became another major focus of this survey.

According to the survey, 80% of investors expect the Bank of Japan's next rate hike to occur in September of this year, 15% are expected to be in October, and 5% are expected to wait until December. None of the respondents expect the rate hike to be postponed until January 2027 or later.

At the same time, the market's warning line about the Japanese government's intervention in the foreign exchange market has also clearly declined. 55% of respondents in September believed that the rise of the dollar to around 160 against the yen was most likely to trigger intervention by the Japanese authorities; in contrast, only 23% of investors chose 160 in August, and more investors thought 165 was the most likely location to trigger intervention at the time.

The importance of normalizing the Bank of Japan's policies has also surpassed corporate profits. In September, 35% of investors viewed the Bank of Japan's policy normalization as the most critical theme in determining the short- to medium-term performance of the Japanese stock market, up from 23% in August; the proportion that chose corporate profits fell from 41% to 20%.

Fund managers continue to be optimistic about the Asian stock market, and Japan and Taiwan are the most popular

Despite the uncertainty in the macro environment, fund managers remain optimistic about the return expectations of the Asian stock market over the next year.

According to the survey, investors expect the Asia-Pacific stock market to have 6.3% room to rise in the next 12 months. This level of optimism is at the 89th percentile of the survey's historical data; the expected return on the Japanese stock market rose to 6.4%, reaching the 94th percentile in history, indicating that investors' optimism about Japanese stocks is already at a historically high level.

Meanwhile, Asia-Pacific equities other than Japan are increasingly viewed by investors as undervalued. In September, the net proportion of those who believed that the region's stocks were overvalued fell to** -20% **, which meant that investors who thought they were undervalued had a clear advantage.

Judging from the specific market allocation, Japan and Taiwan are still the two most popular markets for fund managers in the Asia-Pacific region. Japan's net overmatch ratio was 45%, Taiwan 40%, and South Korea ranked third with 25%.

Semiconductors are still the largest overequipped industry in Asia Bank of Japan's stock allocation has risen to a record high

In terms of industry allocation, technology still dominates.

In the Asia-Pacific market excluding Japan, semiconductors ranked first in all industries with a net overallocation ratio of 50%, technology hardware ranked second with 40%, and telecommunications rose to 20%, ranking third. Financial services and energy were 15% and 10%, respectively.

The rotation of funds in September was also quite obvious. The allocation of the insurance industry increased 23 percentage points month-on-month, and telecom and software increased by 11 and 10 percentage points, respectively; at the same time, healthcare/pharmaceutical allocation fell 42 percentage points, banks fell 22 percentage points, retail/e-commerce fell 16 percentage points, and materials fell 15 percentage points.

The configuration of the Japanese market is highly concentrated on banks and semiconductors. According to the survey, Bank of Japan stocks received 70% of the overmatch selection, rising to the highest level in the survey's history; semiconductors ranked second with 50%, and there is a clear gap between the rest of the industry and these two sectors.

Overall, the Bank of America survey in September showed that Asian fund managers have not given up on AI transactions, but the investment logic is gradually shifting from “capital expenditure driven” to “commercial cash-driven.” As more and more investors believe that the benefits of AI are more fully reflected in stock prices, whether it can actually generate revenue and profits is becoming an important consideration for AI stocks to continue to receive capital to increase their positions in the next stage.

Meanwhile, the Bank of Japan's policy normalization is becoming another important trading line in the Asian market. Not only are fund managers generally betting on the Bank of Japan's interest rate hike in September, but their level of optimism about the Japanese stock market's returns over the next year has also risen to near historic highs. Japan and Taiwan continue to occupy preferred positions in the Asia-Pacific market allocation. Within the AI industry chain, software and platforms replace electricity and energy as the most promising link for risk and return. It also shows that as the AI investment cycle progresses to the next stage, capital focus is gradually shifting from infrastructure construction to AI commercialization and application layer value implementation.