The concept of HALO assets has gained widespread recognition recently, with major international investment banks like Goldman Sachs and Morgan Stanley repeatedly emphasizing the importance of allocating significant resources to these assets. Since the beginning of the year, sectors such as power, grid equipment, non-ferrous metals, railways, logistics, petroleum, and chemicals have indeed demonstrated strong performance. HALO assets, as the name implies, refer to Heavy Assets with Low Obsolescence rates. In the AI era, these assets are not only immune to replacement but are increasingly in demand as essential materials for constructing big data centers and building information highways. Their significance even influences a nation's competitiveness in the age of artificial intelligence. For instance, vigorously developing power capacity is crucial for enhancing a country's competitive edge, as future competition between nations will revolve around two key factors: computing power and electrical power. Thus, energy sources including hydropower, thermal power, and new energy solutions like wind, solar, and storage are focal points for future development, and these industries are typically capital-intensive. Similarly, industrial metals such as copper, aluminum, cobalt, and nickel also exhibit heavy-asset characteristics. The United States, for example, is actively stockpiling industrial metals like copper, as building data centers requires substantial amounts of copper wiring, and the copper usage in new energy vehicles is four times that of traditional automobiles. Therefore, these heavy-asset sectors are becoming indispensable rather than replaceable in the AI era.
Some time ago, it was suggested that technology and HALO assets might represent the two primary investment themes this year. The former represents innovation driven by AI empowerment, while the latter signifies the industrial infrastructure essential for AI development. Both areas warrant close attention, as they may present significant opportunities for investors. In contrast, traditional industries vulnerable to AI displacement or those facing downward cycles are often referred to as "old economy stocks." The persistent underperformance of these stocks is closely linked to economic transformation and developmental trends.
The current AI revolution distinctly reflects a competitive dynamic between China and the United States, with other nations largely playing catch-up. U.S. AI technology stocks have been rising for over a decade. AI-focused tech stocks, exemplified by Nvidia, have surged dramatically, with market capitalizations reaching as high as $5 trillion. Although debates about a bubble in U.S. AI tech stocks are intensifying, America's advantages in AI, CPUs, GPUs, semiconductors, and large models remain pronounced, positioning it as a frontrunner. However, China is not lagging behind; with the emergence of the DeepSeek large model, China has achieved a major breakthrough in technological innovation. Particularly in AI applications, China holds distinct advantages. With the world's largest consumer market and population, China possesses unique strengths in promoting AI adoption. A prime example is humanoid robots, which represent an ideal application of AI in consumer contexts. Soon, Tesla, under Elon Musk, is set to launch the Optimus V3 robot, which marks significant advancements over previous versions. Once V3 is officially unveiled, the humanoid robotics sector may experience a new wave of opportunities.
In terms of AI applications, China is poised to lead globally in the future. Just as the internet, though not invented in China, was combined with consumer needs to create several great companies, the "AI + applications" trend in the AI era is expected to yield another batch of leading firms. Existing internet giants are ramping up investments in artificial intelligence, vigorously advancing in areas like AI chips and large models. The recent Spring Festival Gala featured numerous AI elements, with participation from robots produced by companies like Doubao, Zhuimi, and four robotics firms, underscoring China's leading position in AI application development. This progress is likely to translate into solid performance and foster the rise of influential companies.
The fourth technological revolution is now in full swing. If last year's rally in A-share tech stocks was driven by conceptual hype, this year is shifting toward competition based on orders and actual performance. Consequently, investing will become more challenging, necessitating a return to fundamental analysis to identify tech leaders with core technologies, partnerships with major manufacturers, and genuine innovative capabilities. Purely speculative tech stocks may face capital outflows. Thus, value investing is not limited to traditional blue-chip stocks; it also includes allocating to tech leaders that represent future growth directions.
As AI applications advance and more innovations materialize, related companies may achieve breakthroughs in orders and revenue this year. In robotics, for instance, mass production is gradually commencing. Since late 2024, humanoid robots have been viewed as a promising direction, potentially becoming China's fourth major industrial sector after home appliances, mobile phones, and new energy vehicles. Last year, Unitree Robotics, the largest producer, manufactured only 5,500 units, but output could surge to tens of thousands this year. Similarly, Musk's Optimus robot produced around 4,000 units last year, with projections also pointing to tens of thousands this year. Tesla has halted production of its Model X and Model S at its California factory to convert the production line for robots, targeting an annual capacity of one million units. Musk aims for Tesla's robot production to reach one million units by 2030 and ten million by 2050. This expansion is expected to boost orders for component suppliers partnering with Tesla. Therefore, current investments in robotics should focus on leading component manufacturers, especially those integrated into Tesla's supply chain or domestic leading robotics industrial chains, as these companies may demonstrate sustained performance.
Other AI application sectors are also expected to achieve mass production within the next two years, transitioning from speculative themes to tangible performance. This shift could lend stability and longevity to the current tech stock rally. The market is currently characterized by a clear divergence, adopting a barbell strategy: on one end, the technology innovation sector continues to perform well, and on the other, heavy-asset sectors represented by HALO assets, including resource and dividend stocks. The former, as growth stocks, offer significant upside potential, while the latter represent infrastructure essential in the AI era and resistant to displacement. Both segments deserve close attention. Conversely, sectors gradually phased out during economic transformation are unlikely to see near-term improvement or sustained performance, and investors should continue to avoid them. Capital markets act as barometers of economic change, reflecting these transitions.
Divergence regarding a bubble in U.S. tech stocks is indeed significant. Warren Buffett has substantially reduced his U.S. stock holdings, with Berkshire Hathaway's cash reserves reaching $370 billion—exceeding its equity holdings—indicating a stock allocation of less than 50%. Recently, in a discussion with investment veteran Jim Rogers, he revealed that he has liquidated all his U.S. stock positions. Rogers even expressed concern that a burst of the U.S. tech bubble could lead to the most severe decline he has witnessed. Of course, many investors remain optimistic about U.S. tech stocks; for instance, at a forum earlier this year and in a CCTV special, Dan Bin expressed a bullish outlook on AI tech performance this year. The view here is that volatility in U.S. stocks will inevitably increase this year. While the existence of an AI tech bubble is evident, the growth prospects of the AI industry are also clear, potentially leading to a middle path. U.S. stocks are unlikely to experience the catastrophic decline feared by Rogers, nor will they continue surging unchecked. Instead, they may undergo significant adjustments influenced by international dynamics and delays in Federal Reserve rate cuts. Given the existing bubble and the potential for a correction, reducing exposure to U.S. stocks appears prudent. While the timing of a sharp decline is unpredictable, a substantial correction to alleviate valuation bubbles seems inevitable. Hence, caution is advised for investments in U.S. stocks, including equities and ETFs, as a sensible strategy.
A golden cross MACD signal has formed, indicating positive momentum for certain stocks.