Has Trump's intervention marked the end of the revaluation of Chinese concept stocks?

Hello everyone!

This is Dolphin Research. Since the Spring Festival, Chinese assets have been continuously revalued, and last week they finally corrected. The trigger for the correction is also worth noting; at the beginning of the week, it was Trump's "America First Investment Policy," and by the end of the week, Trump issued another decree imposing an additional 10% tariff on China.

Of course, last week not only Chinese assets fell; global assets were generally in decline. Overall, since the beginning of 2025, Chinese assets have significantly outperformed the market.

So, how should we view the cross-market risks and opportunities going forward? Let's take a detailed look at last week's economic data:

1. Did U.S. consumer spending collapse in January?

As a consumption-driven economy, the U.S. contributes over 70% of its GDP from domestic demand; 80-90% of GDP growth is also driven by domestic demand. However, in January, U.S. consumer spending suddenly "stalled":

After adjusting for inflation, U.S. personal consumption expenditures (PCE) in January showed a month-on-month negative growth of 0.47%; among them, a. spending on services weakened, with growth of only 0.08%; b. goods consumption fell sharply by 1.76% month-on-month, mainly due to declines in both durable and non-durable goods, with durable goods seeing a larger drop of 3.35% month-on-month.

Of course, the next question is whether the decline in consumer spending is due to falling income or whether income hasn't fallen, but people are saving more and reluctant to spend?

Due to the same trend in nominal consumption expenditures, Dolphin Research answers this question from the nominal figures:

a. In January, the monthly increase in U.S. residents' income sources: the main income source—employee compensation increased by $67 billion, which is still at a relatively high level month-on-month. Additionally, due to a good stock market performance, the increase in asset income is also relatively high. Moreover, January has been a peak month for transfer payments (similar to subsidies received from the government) for the past two years, so in January, U.S. residents' total annualized income increased by $222 billion, the highest in 12 months, indicating no issues with income generation.

b. In January, the monthly increase in U.S. residents' expenditure outflows: the net increase in savings was very exaggerated—an increase of $247 billion month-on-month, consuming all of the net income increase for the month, leading to negative growth in all expenditures except for interest payments, which means a reduction, and consumer spending is an important item. Consumer spending shrank by $31 billion in January.

In the triangular relationship of income, savings, and consumption: the stable income in January, squeezed consumption, and sharply increased savings resulted in a sudden rise in the household savings rate.

As we know, one major reason the U.S. economy has not landed in the past two years is that the growth rate of GDP's main driver—household consumption expenditure—has consistently outpaced the growth rate of household income, meaning that household consumption has continuously squeezed household savings, leading to a declining savings rate. A higher savings rate is certainly not good for consumption.

However, is the January savings rate a short-term noise or a turning point for a new trend? Theoretically, current household income, future income expectations, and economic security perceptions all influence current consumption expenditure.

With stable growth in household income in January and relatively decent new actual employment, Dolphin Research tends to believe this is more of a short-term information noise, especially since January itself is a time prone to "statistical errors" at the beginning of the year.

At the same time, it is important to note that the cost-cutting and efficiency-boosting measures driven by DOGE, along with layoffs, and a decline in the consumer confidence index in February, indeed warrant attention to how much space remains for household consumption to continue squeezing the savings rate.

Generally speaking, when economic data is not good, the market interprets it as a favorable expectation for interest rate cuts. However, this time the decline in consumption is relatively significant, coupled with recent turmoil from Trump regarding government layoffs, immigrant deportations, and tariffs, which has increased economic uncertainty and, to some extent, affected the market's risk appetite.

II. Nvidia + Salesforce "Double Bears," Does U.S. Stock AI Need to Adjust for a While?

Previously, after the earnings season of U.S. tech giants, Dolphin Research mentioned that these giants seem to be entering a phase of high capital expenditure (capex) and accelerated depreciation, with operational expenditures (such as AI personnel) resonating in three phases; meanwhile, the revenue side has not accelerated year-on-year growth to dilute the pressure of expenditures, leading to a correction cycle for stocks driven by AI narratives.

After the correction, whether recovery is possible depends on Nvidia and Salesforce. These two companies represent the marginal demand increase for computing power on one side, while on the other side, they represent the most promising AI application—AI Agents—in the advancement of the software ecosystem.

From the actual results perspective, Nvidia is still relatively strong from the standpoint of expected differences, but in terms of the trend itself, especially currently, Nvidia is more focused on the quarter-on-quarter increase in data center revenue, which has not further increased From the perspective of gross profit margin, the market originally expected that the quarter ending in January would be the short-term bottom, as demand such as H20 would pick up after February. However, the company's expression suggests that the next quarter will also hover at the bottom, with improvement only expected in the second half of the year, which is somewhat disappointing.

For pure third-party computing power providers, both NVIDIA and AMD have been in a relatively cold cycle of product ramp-up in the first half of the year, with activity expected to pick up in the second half. As a result, NVIDIA's earnings report did not serve as the "soul support" for the upward turn of the upstream semiconductor sector in the US AI market.

At the same time, regarding Salesforce, although the AI Agent story is macro, its implementation seems to be slow in the latest quarter. Moreover, the high investment and slow rollout of new businesses, along with the faster-than-expected slowdown in growth of some older businesses, means that the narrative around AI Agents in the US stock market has not been further developed by Salesforce.

Currently, with DeepSeek stirring up certainty in computing power, the entire Nasdaq in the US is primarily in a downward trend, continuously correcting.

II. Technology Cycle vs. Great Power Competition Cycle, Where to Next for the Revaluation of Chinese Concepts?

The US-China assets since the beginning of this year have been quite interesting: DeepSeek acts like a catfish stirring up global asset reallocation, leading Trump, who is accustomed to promoting stock market rises as achievements, to see the US stock market continuously correct after officially taking office, while Chinese assets continue to recover upwards. Last week's events almost echoed each other:

At the beginning of the week, Trump issued a memorandum on the "America First Investment Policy," which primarily aims to restrict inbound and outbound investments in strategic industries from "hostile countries"—preventing them from investing in the core strategic industries of the US and vice versa. For example, US outbound investment targets are required to exclude Chinese investments in AI, high-end manufacturing, etc. The VIE structure commonly used by Chinese companies listed overseas may also be affected.

By Friday, the US announced an additional 10% tariff on China starting March 4th. This is a new 10% tariff following the previous one on February 4th.

As a result, although there has been continuous net buying of Chinese assets by southbound funds during this round of revaluation in Hong Kong stocks, Chinese assets ultimately corrected last week, coinciding with the start of the Two Sessions.

Interestingly, as previously mentioned by Dolphin Research, the sustainability of the market requires sector rotation. Last week, technology assets corrected, but consumer assets showed slight movements under the expectations of the Two Sessions.

Next, the US will have PMI data, significant changes in non-farm payrolls for February, and unemployment rate data, while the domestic Two Sessions will last about a week. Attention can be paid to the formulation of social and economic fiscal targets during the Two Sessions. Currently, market expectations for economic stimulus are not high, with a focus on whether there will be incremental consumer stimulus policies, especially in service consumption.

Of course, in terms of rhythm, attention should be paid to the tariffs this time. Therefore, the previous market expectation was for reciprocal tariffs on value-added tax countries, which means an equal increase in external tax rates, and even the domestic value-added tax rate in China is relatively low. With two consecutive tariff increases on China within a month, Chinese assets may need to adjust.

Dolphin Research also noticed that after the announcement, the dollar strengthened under inflation expectations, and based on the depreciation hedging tariff expectations, the RMB exchange rate also depreciated. The depreciation of the RMB itself is unfavorable for Chinese concept stocks.

In this case, Dolphin Research believes it is necessary to consider locking in profits on Chinese technology assets in the short term, or if one is firmly optimistic about this round of revaluation of Chinese technology assets and wants to continue to go long, consider making certain hedging protections for the gains on hand.

IV. Portfolio Adjustment and Returns

Last week, Alpha Dolphin made no adjustments to the portfolio. The Alpha Dolphin portfolio had a return of -3.7% last week, underperforming the CSI 300 (-2.2%) and the S&P 500 (-1%), but outperforming MSCI China (-4.3%) and Hang Seng Tech (-5%).

Since the portfolio began testing (March 25, 2022) until last weekend, the absolute return of the portfolio is 78%, with an excess return of 77% compared to MSCI China. From the perspective of net asset value, Dolphin Research's initial virtual asset of 100 million USD has exceeded 180 million USD as of last weekend.

V. Individual Stock Profit and Loss Contribution

Last week, U.S. tech stocks continued to adjust due to the underwhelming performance of core AI stocks—NVIDIA and Salesforce, while Chinese concept stocks adjusted to lock in profits due to increased external uncertainty risks.

In the pool of stocks covered by Dolphin Research, under increased uncertainty, small-cap U.S. stocks such as Applovin, Palantir, Wolfspeed, and Tesla, which had previously seen significant retail investor-driven gains or had high valuations, generally experienced larger declines.

The decline in Chinese concept assets was either due to previous excessive gains, such as Alibaba, or related to tariffs, such as Pinduoduo; or due to significant discrepancies in performance expectations, such as Trip.com.

For specific stocks with significant fluctuations, Dolphin Research explains as follows:

6. Asset Allocation Distribution

The Alpha Dolphin virtual portfolio holds a total of 17 stocks and equity ETFs, with a standard allocation of 8 stocks, an overweight of 1 stock, and the rest underweight. Besides ancient coins, assets are mainly distributed in gold, U.S. Treasury bonds, and U.S. dollar cash.

As of last weekend, the asset allocation and equity asset holding weights of Alpha Dolphin are as follows:

7. Key Events This Week:

This week marks the end of the U.S. stock earnings season, with two ASIC computing power companies, Marvell and Broadcom, releasing their results; Chinese concept companies are slowly entering the earnings season, with JD.com and SEA being the main focus this week.

Specific areas to pay attention to, Dolphin Research summarizes as follows: