Goldman Sachs traders: Global stock markets welcome the "next big rotation," from Mag 7 to Chinese robots

On February 12th local time, Mark Wilson, a partner and managing director at Goldman Sachs, published an article stating that the investment opportunities in AI are shifting from the infrastructure level to the application level, and investment perspectives should break through the limitations of Mag7 and U.S. tech stocks, such as the Chinese robotics sector.

In the report I released this weekend, I discussed the news overload in the post-election era, the market's resilience to headline shocks (whether from DeepSeek or tariff policies—although we are gradually realizing that tariff actions will not "end once and for all," but are a continuous policy tool), the much better-than-expected Q4 earnings season, last week's strong interest from investors in the possibility of a pause in the Russia-Ukraine conflict, and the importance of Lagarde/Von der Leyen's blog ahead of Germany's upcoming key elections.

However, the above content was ultimately cut for reasons including: the relevant topics have been widely covered; the themes discussed below are more scarce; recent trips to the U.S. indicate that reverse investment opportunities in European stock markets are diminishing; and the need for the article to remain concise.

Currently, AI remains a dominant investment theme, but investment opportunities are shifting from infrastructure to applications. As one viewpoint stated: "The infrastructure race is over, and the application race is just beginning." With AI applications being widely implemented, the market breadth is expected to expand accordingly.

Recently, only DeepSeek, a Chinese topic, has attracted mainstream attention. However, in the past 30 days, many headlines have emerged in China's innovation sector:

1. Chinese satellites surpass Musk's Starlink technology, achieving a record 100Gbps data transmission rate using laser communication.
2. ByteDance launched "OmniHuman" technology, enabling dialogue and singing functions for photo subjects.
3. China's new high-speed train trial speed broke 450 kilometers per hour, setting a new world record.
4. China has been approved to build the world's largest hydropower station project, with a total investment of $137 billion.
5. China's "artificial sun" nuclear fusion device achieved operation at a high temperature of 100 million degrees Celsius for over 1,000 seconds.
6. After the TikTok ban, Xiaohongshu topped the U.S. app store download charts.
7. China's lithium reserves have surpassed Australia, rising to second place globally.

Although Meta has set a record for the longest consecutive rise in the history of the S&P Top 50 constituents (17 days), the "Mag7 vs other assets" trend that has dominated the global stock market in recent years is facing a test this year.

Since the stock market bottomed out in November 2022, the relative strength of Mag7 (compared to the MSCI Global Index) has shown signs of fatigue for the first time: The relative advantage of the S&P 500 equal-weighted index peaked in July last year.

Microsoft's relative strength also peaked in November 2023.

In contrast, the Chinese market: over the past year, the Hang Seng Tech Index has risen 18% year-to-date (yellow line), Goldman Sachs' China AI beneficiary stock portfolio (white line) has risen 23%, and the Chinese robotics stock portfolio (blue line) has surged 39% (compared to only 3% for the U.S. robotics portfolio).

It should be noted that the risk-return profile of the Chinese robotics sector cannot be directly compared to Mag7, but as AI applications accelerate penetration before 2025, investment perspectives should break through the limitations of Mag7 and U.S. tech stocks (if there is a market theory framework similar to the "Overton Window," please feel free to share).

For investors focusing on China, the current timing is advantageous:

Goldman Sachs' prime brokerage data shows that long positions are at the 6% percentile of a five-year range, and swap trading still presents significant excess return opportunities.

Supplementary Highlights on China Themes

1. New box office record: The animated blockbuster "Ne Zha 2" has grossed over $1 billion in China within 10 days of its release. According to Maoyan data, this sequel, which opened during the Spring Festival, has accumulated 7.7 billion yuan as of Sunday, surpassing "Star Wars: The Force Awakens" in North America, which grossed $936.7 million, and setting a new single-market box office record!

2. Divergence in financial stocks: Although Chinese/emerging market leveraged bank stocks HSBC and Standard Chartered, listed in London, have performed well recently, Prudential, also listed on the London Stock Exchange, remains constrained by declining yields in China and is at a low level. For micro contrarian investors, this presents a good opportunity for positioning.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk