BOC International: Fluctuations in global technology stocks increase the speed of domestic replacement of semiconductor equipment

The Zhitong Finance App learned that BOC International released a research report saying that technology stocks have clearly fluctuated recently. Apart from investors' concerns about excessive AI infrastructure discussions triggered by META management, technology stocks were overvalued after experiencing a rapid rise in the 2nd quarter, and transactions were overcrowded, and investors' profits spurred back, or the main cause of stock price fluctuations. At the same time, the bank believes that the fundamentals of AI infrastructure have not changed. The capital expenditure of large cloud service providers will continue to rise after a sharp year-on-year increase in 2026 or in 2027, and that the main players in AI infrastructure investment may continue to be enriched, and investment channels may be further diversified. The bank believes that key upstream supply chains, including advanced/mature semiconductor manufacturing, optical module/optical communication, memory, advanced packaging, etc. may continue to be in short supply.

The main views of BOC International are as follows:

Global tech stocks have increased in volatility but are still outperforming the market

In the past month, global technology stocks have fluctuated greatly due to factors such as increased uncertainty about the Federal Reserve's monetary policy path and crowded transactions in the technology sector, especially in the storage sector, but US/A/Hong Kong technology stocks still outperformed the market. From June 10 to July 9, 2026, the MSCI Information Technology Index rose 4.0%, outperforming the MSCI Global Index (+3.2%). The A-share Wande Information Technology Index rose 13.9%, surpassing the Shanghai and Shenzhen 300 (+2.7%), continuing strong growth; most of the remaining A-share tier-1 industries declined, and the IT sector showed outstanding performance. The Hang Seng Technology Index rose slightly by 0.1%, and the Hang Seng Index fell 1.5%; the performance of Hong Kong technology stocks lagged behind A-shares and US stocks. On the valuation side, the valuation of US technology stocks is relatively stable. The price-earnings ratio (NTM) of the Philadelphia Semiconductor Index surpassed the extremely high value around October 2025 this month. The price-earnings ratio of the A-share Shenwan Electronics Index rose to 101.0x in the past month, and the price-earnings ratio of the Shenwan Semiconductor Index rose to 158.4x; both broke through the highest level since 2020 this month.

Raise AI communication network chip market size forecast

Combining the performance of Broadcom and Nvidia, the bank raised the 2026/2027 market size forecast for AI communication network chips to US$10,75/154.9 billion (previously US$554/67.8 billion). The bank believes that as AI infrastructure network architectures continue to evolve, the importance of network chips in AI chips may rise further.

In May, semiconductor equipment imports fell 9% year on year, and domestic substitution accelerated

In May 2026, the import value of semiconductor equipment from mainland China fell 9% year on year. The cumulative import amount for January-May fell 11% year on year. The bank believes this is mainly due to the further increase in the competitiveness of domestic equipment, while the production/export capacity of overseas equipment manufacturers is limited. The bank maintained its forecast for the 2026/27 semiconductor equipment market size of US$572/65 billion, and is confident about the prospects for domestic replacement of semiconductor equipment in mainland China. TSMC's June revenue was NT$442.68 billion, up 68% year on year and 6% month on month. Total revenue for 2Q26 was NT$1.27 trillion, up 36% year over year. The bank maintained its forecast of 34% year-on-year revenue growth for the full year.

The June storage contract price was generally stable, and the supply was in short supply or continued until 4Q27

The average price of an 8Gb DDR5 contract increased from $11.88 in May to $12.25 in June, and the average price of an 8Gb DDR4 contract increased from $17.10 to $17.60 in May. The NAND Flash contract price is generally stable, and the average price of the 256Gb TLC and 512gbTLC contracts remained at $12.32 and $24.60, respectively. The increase in storage prices slowed marginally in June after experiencing rapid increases for many months before, but the bank still maintains the judgment that the industry's supply shortage will continue until at least 4Q27, and believes that if prices fall back in 2028, the fluctuation may be more moderate than in the previous cycle. As for dedicated storage, the shortage of supply is expected to continue until 2Q27 under the production capacity replacement space created by general-purpose storage plants shifting production capacity to AI-related products.