Because the U.S. and China settle into an uneasy one-year truce, the takeaway for buyers is that every nation will double-down on homegrown expertise, analysts mentioned. “Personal high quality exporters and R & D-rich tech shares aligned with localization, and use situation odds — not headlines — to evaluate danger,” Morgan Stanley strategists advisable in a report this month on the way to navigate the brand new “export management regime.” “The strategic rivalry stays unresolved, with expertise, crucial provide chains and capital markets on the coronary heart of ongoing tensions,” the report mentioned. Whereas Washington has restricted Chinese language entry to superior expertise and inspired synthetic intelligence-related funding within the U.S., China is ramping up its personal spending and useful resource allocation to superior expertise in its upcoming five-year plan. Semi computing energy Core to the AI race is computing energy, specifically in semiconductors. Morgan Stanley’s high choose is SMIC, China’s home chip big. The analysts price the Hong Kong-listed shares obese, and have an 80 Hong Kong greenback ($10.28) value goal. That is greater than 16% above the place the inventory closed Friday. “Given U.S. export controls and increasing capability, we anticipate SMIC to obtain extra orders for superior node manufacturing,” the analysts mentioned. “We additionally consider SMIC’s superior node capability growth will help the AI semi growth in China.” One other rising concern is whether or not firms can have sufficient vitality to energy AI. Goldman Sachs analysts this month predicted that by 2030, China can have spare energy capability greater than 3 times what the world will doubtless want then to energy knowledge facilities. For the yr forward, HSBC late final week known as vitality self-sufficiency one of many new themes that may drive regional shares. “We consider the Asia fairness story in 2026 shall be led by a pivot away from crowded AI trades,” its analysts mentioned. The financial institution’s main choose was Hong Kong-listed small cap Harbin Electrical, which had greater than 60% upside to HSBC’s 22 HKD goal value, primarily based on Friday’s shut. “Harbin Electrical instructions round one-third to half of the home market share in energy gear for coal, nuclear and hydro energy gear, with these sectors contributing almost 70% to its income (in 2024),” the HSBC analysts mentioned. “Harbin is an asset-light enterprise mannequin and receives prepayments from prospects.” Robotic {hardware} When it comes to AI commercialization, firms in China are vying with their U.S. friends not just for software program advances however {hardware} functions, notably in humanoid robots. Goldman Sachs analysts visited 9 humanoid robotic provide chain firms earlier this month and located that almost all are “actively planning capability in each China and abroad (primarily in Thailand, and fewer in Mexico)” to help potential mass manufacturing — to the tune of 100,000 to 1 million items a yr. Whereas that could be overly optimistic in comparison with Goldman’s projections of 1.38 million annual humanoid shipments by 2035, the analysts mentioned suppliers are shifting aggressively and have talked about their prospects embody well-known humanoid gamers Tesla Optimus, Agibot and Xpeng. Goldman’s solely buy-rated Hong Kong play is Sanhua, which administration says is taking a extra conservative strategy by ramping up manufacturing primarily based on precise buyer orders. Sanhua has additionally reserved capability in Thailand for humanoid robotic elements manufacturing. Regardless of the thrill about longer-term tech innovation, markets within the close to time period will nonetheless be targeted on the newest U.S.-China commerce talks. The 2 sides have but to achieve a agency deal on uncommon earths exports, though U.S. Treasury Secretary Scott Bessent has indicated one might occur by Thanksgiving. All which means that Chinese language shares are prone to stay extremely risky. “We think about this truce fragile, given persistent U.S.-China aggressive confrontation on a number of fronts,” the Morgan Stanley analysts mentioned, “which implies rolling negotiations, truces and periodic flare-ups will doubtless be the brand new norm for the foreseeable future.” Morgan Stanley mentioned that the MSCI China index tends to see short-term corrections following intervals of U.S.-China stress. However they discovered that “expertise {hardware} and semiconductor names usually rebound inside a month after their preliminary sharp declines.” —CNBC’s Michael Bloom contributed to this report.