GS Basics: Reflexivity, Profit Seeking, and China Domestic Divergence

This report highlights a divergence in the AI value chain, noting that memory producers are extracting value from hyperscalers as the latter face capex-related margin concerns. Simultaneously, China is experiencing a stark economic split between state-supported strategic industries and a struggling traditional sector.

Key Takeaways

• 1.Memory producers are benefiting from AI infrastructure spending, while hyperscaler hyperscalers face margin pressure as they transition from construction to harvesting phases.
• 2.The rise of open-weight models may reduce the need for centralized cloud/frontier ecosystem workloads, potentially impacting hyperscaler capex mandates.
• 3.China is undergoing a domestic divergence where policy directs capital toward strategic sectors (AI, semiconductors, defense) while traditional industries like real estate and consumption deleverage.

Table of Contents

• AI/Hardware
• Hyperscalers
• Open-Weight
• Oil
• China
• Risk/Technicals
• China Auto
• China Real Estate
• China Banks
• China Consumption

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