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The market has already priced in Josh D&#39;Amaro&#39;s operational mastery. His track record leading Disney Experiences is undeniable, having built the division into the company&#39;s <a href="https://www.reuters.com/legal/transactional/disney-taps-parks-head-josh-damaro-ceo-lead-post-iger-era-2026-02-03/" target='__blank'>largest profit engine</a> with a record operating profit of nearly $10 billion last fiscal year. That unit, which includes theme parks and cruises, is the core of his proven strength. The board&#39;s unanimous choice signals stability and a clean handoff of this proven business. Yet the expectation gap lies in what comes next.For Disney, the primary growth drivers have shifted decisively toward content creation and streaming profitability. The market has priced in the need for a leader who can navigate Hollywood&#39;s creative currents and the intense competition in digital entertainment. D&#39;Amaro&#39;s unfamiliarity with Hollywood is a known risk, and the board&#39;s selection of a pure operations expert over a creative executive like Dana Walden for the top spot underscores a lack of disruptive change. This is a classic &quot;buy the rumor, sell the news&quot; setup for the content side of the business.The new structure attempts to bridge the gap. D&#39;Amaro will work directly with the newly appointed <a href="https://variety.com/2026/film/news/josh-damaro-disney-ceo-bob-iger-1236650641/" target='__blank'>chief creative officer</a>, Dana Walden, who brings a different, more traditional Hollywood pedigree. <visualization data='{&quot;components&quot;:[{&quot;show_type&quot;:&quot;jgyNewLowcode&quot;,&quot;config&quot;:{&quot;type&quot;:&quot;iwcapp/stockBackTestTool&quot;,&quot;version&quot;:&quot;0.0.3&quot;,&quot;url&quot;:&quot;//cdn.ainvest.com/frontResources/s/foiegras/stockBackTestTool/0.0.3/stockBackTestTool@0.0.3index.js&quot;},&quot;data&quot;:{&quot;columns&quot;:[{&quot;index_name&quot;:&quot;strategy_basic_info&quot;,&quot;key&quot;:&quot;strategy_basic_info&quot;,&quot;type&quot;:&quot;Object&quot;},{&quot;index_name&quot;:&quot;backtest_condition&quot;,&quot;key&quot;:&quot;backtest_condition&quot;,&quot;type&quot;:&quot;Object&quot;},{&quot;index_name&quot;:&quot;backtest_result&quot;,&quot;key&quot;:&quot;backtest_result&quot;,&quot;type&quot;:&quot;STR&quot;}],&quot;datas&quot;:[{&quot;strategy_basic_info&quot;:{&quot;name&quot;:&quot;Absolute Momentum Long-Only Strategy&quot;,&quot;description&quot;:&quot;Long DIS when 252-day rate of change is positive and price closes above 200-day SMA. Exit on close below 200-day SMA, after 20 days, or if TP +8% or SL -4% is hit.&quot;},&quot;backtest_condition&quot;:{&quot;object&quot;:{&quot;display_name&quot;:&quot;Object&quot;,&quot;type&quot;:&quot;ticker&quot;,&quot;ticker&quot;:[&quot;DIS&quot;]},&quot;open_signal&quot;:{&quot;display_name&quot;:&quot;Open Signal&quot;,&quot;type&quot;:&quot;criteria&quot;,&quot;criteria&quot;:&quot;252-day rate of change &gt; 0 and close &gt; 200-day SMA&quot;},&quot;sell_signal&quot;:{&quot;display_name&quot;:&quot;Close Signal&quot;,&quot;type&quot;:&quot;criteria&quot;,&quot;criteria&quot;:&quot;close &lt; 200-day SMA, or after 20 trading days, or TP +8%, or SL -4%&quot;},&quot;risk_control&quot;:{&quot;display_name&quot;:&quot;Risk Control&quot;,&quot;parameters&quot;:{&quot;take_profit&quot;:{&quot;display_name&quot;:&quot;Take-Profit&quot;,&quot;value&quot;:8,&quot;unit&quot;:&quot;%&quot;},&quot;stop_loss&quot;:{&quot;display_name&quot;:&quot;Stop-Loss&quot;,&quot;value&quot;:4,&quot;unit&quot;:&quot;%&quot;},&quot;max_holding_days&quot;:{&quot;display_name&quot;:&quot;Hold Days&quot;,&quot;value&quot;:20}}}},&quot;backtest_result&quot;:&quot;https://cdn.ainvest.com/backtest/agent/session/784562/1800109709/545497b4-deb0-4d68-ad80-ecab1498af89/DIS_abs_mom_backtest_20240204_20260203.json&quot;}]},&quot;uuid&quot;:&quot;1770210118418&quot;}],&quot;page&quot;:{&quot;layout&quot;:{&quot;layout_mode&quot;:&quot;grid&quot;,&quot;layout_data&quot;:&quot;[{\&quot;uuid\&quot;: \&quot;1770210118418\&quot;, \&quot;show_type\&quot;: \&quot;jgyNewLowcode\&quot;}]&quot;}}}' dataurl='null'></visualization>But the market&#39;s skepticism is clear. The board&#39;s choice to appoint a veteran of the experiences unit as CEO, while promoting a creative leader to a supporting role, suggests the company is prioritizing the known quantity of park profits over the uncertain path of content-led growth. In a phase where streaming margins and blockbuster pipelines are critical, this leadership mix may be insufficient to reset expectations. The market has priced in D&#39;Amaro&#39;s excellence in one arena; it is now waiting to see if he can master the next.<h2>Streaming&#39;s Profitability Puzzle: Growth Priced In, Margin Gaps Remain</h2>The market has already priced in Disney&#39;s streaming growth. The final subscriber report delivered a beat, with combined Disney+ and Hulu users hitting <a href="https://variety.com/2025/tv/news/disney-plus-hulu-subscriber-gains-kimmel-controversy-1236580606/" target='__blank'>195.7 million</a> and adding 12.4 million new subscribers in the quarter. That topped estimates by over two million. Yet the stock&#39;s reaction to the broader earnings beat was mixed, with shares falling in pre-market trading. This is the classic &quot;sell the news&quot; dynamic for a growth story that has been running for years.The real expectation gap now lies in profitability. While the direct-to-consumer segment showed strength, with operating income jumping 39%, the business still carries a high cost base. The key metric is margin, and Disney&#39;s streaming operating margin sits at <a href="https://www.investing.com/news/transcripts/earnings-call-transcript-disney-beats-q1-2026-earnings-stock-dips-93CH-4479064" target='__blank'>12%</a>. For a market demanding sustainable profits, that figure is a work in progress. The company&#39;s own target is for 10% streaming margins, suggesting the current level is seen as a near-term plateau, not a breakout.This sets up a critical reset. With Disney no longer reporting subscriber numbers after this quarter, the focus shifts entirely to margin expansion and pricing power. The final quarter of reporting creates a &quot;whisper number&quot; moment, where the market will scrutinize every dollar of cost control and every incremental price hike. The recent U.S. price increases across most Disney+ and Hulu plans are a direct attempt to address this, but their impact on churn will be the next key data point. The market has priced in subscriber growth; it is now waiting to see if Disney can convert that growth into the profitable engine it needs.<h2>The Abu Dhabi Bet: A $36 Billion Expansion with Unpriced Execution Risk</h2>For Josh D&#39;Amaro, the Abu Dhabi theme park is the centerpiece of his legacy. The project is a direct extension of his track record as the <a href="https://www.npr.org/2026/02/03/nx-s1-5697839/disney-damaro-ceo" target='__blank'>&quot;architect of the largest global expansion in the history of Disney Experiences,&quot; to the tune of $36 billion</a>. It is the ultimate validation of his operational mastery. Yet, this high-stakes catalyst is where the market&#39;s optimism meets a significant expectation gap.The partnership model with the Miral Group, mirroring Disney&#39;s successful arrangement in Japan, carries its own set of unpriced risks. While Miral handles development and construction, Disney&#39;s Imagineers provide creative design and operational oversight. This has worked before, but the UAE market is a different world. History is not on Disney&#39;s side; the region has seen <a href="https://www.disneyfoodblog.com/2025/05/30/3-huge-theme-parks-have-failed-in-abu-dhabi-can-disneyland-still-succeed/" target='__blank'>other major theme park announcements fail or never materialize</a>, including a stalled Universal project in Dubai. The cultural and consumer dynamics in Abu Dhabi are untested for a Disney resort, introducing execution risk that is not yet reflected in the stock&#39;s valuation.The project&#39;s timeline and cost are also unpriced into the stock. The announcement was made last spring, but the park is years away from opening. In the interim, any missteps in planning, construction delays, or cost overruns could become a source of future guidance surprises. The market has priced in D&#39;Amaro&#39;s past success; it has not priced in the complexities of building an &quot;oasis of extraordinary Disney entertainment&quot; in a new region with different consumer habits and regulatory environments.This expansion is a classic high-conviction, high-risk bet. It represents a $36 billion commitment to growth, but its success is not guaranteed. For the stock to sustain its current optimism, the execution must be flawless. Any stumble in the Abu Dhabi build-out would directly challenge the narrative of D&#39;Amaro&#39;s infallibility, turning a legacy project into a liability. The market is waiting to see if the real-world experience matches the initial, positive vision.<h2>Market Skepticism: &quot;Sell the News&quot; Despite Earnings Beats</h2>The market&#39;s reaction to Disney&#39;s latest quarterly report is a textbook case of &quot;sell the news.&quot; The numbers were strong: Q1 2026 earnings per share came in at <a href="https://www.investing.com/news/transcripts/earnings-call-transcript-disney-beats-q1-2026-earnings-stock-dips-93CH-4479064" target='__blank'>$1.63</a>, beating the forecast of $1.57, while revenue of $25.98 billion also topped expectations. Yet, shares fell 2.83% in pre-market trading. This divergence between a solid beat and a negative price move highlights a key dynamic: investors are looking past the quarter&#39;s reality to deeper concerns about the future.<visualization data='undefined' dataurl='https://cdn.ainvest.com/news/visual/visual_components/viz_bjcb04v0.json'></visualization>The expectation gap here is clear. For years, Disney&#39;s stock has underperformed, a trend that signals high, unmet expectations. The market has priced in a steady stream of operational wins from the experiences division, which generated over $10 billion in revenue last quarter. That success is now the baseline. The beat was expected; the disappointment is in what wasn&#39;t addressed. As analyst Paulo Pescatore noted, <a href="https://www.morningstar.com/news/marketwatch/2026020397/disneys-new-ceo-josh-damaro-faces-a-tough-road-ahead-heres-what-to-expect" target='__blank'>the future of the company lies in content creation</a>, a domain where D&#39;Amaro&#39;s new CEO has no direct track record. The stock&#39;s decline suggests investors are already questioning whether the new leader can deliver on that more critical growth front.This sets a high bar for D&#39;Amaro from day one. He inherits a company where the whisper number for content and streaming profitability is already elevated. The recent beat on streaming margins to 12% is a step forward, but the stock&#39;s reaction shows the market is waiting for more. With the CEO transition just weeks away, the pressure is immediate. The market is saying that simply meeting the forecast is not enough; it demands a reset of expectations for the content-led future. The &quot;sell the news&quot; dynamic confirms that the bar for D&#39;Amaro is set very high.<h2>Competitive Pressure: A Consolidating Industry with Shifting Power</h2>The external threat landscape for Josh D&#39;Amaro is one of deepening competition and industry consolidation, a reality that will test his operational skills in a new arena. The market has priced in Disney&#39;s dominance, but the rules of engagement are changing. Competition is intensifying as <a href="https://www.reuters.com/legal/transactional/disney-taps-parks-head-josh-damaro-ceo-lead-post-iger-era-2026-02-03/" target='__blank'>Netflix and Paramount eye Warner Bros assets</a>, a potential consolidation wave that could pressure studio profitability across the board. In this environment, Disney&#39;s own studio margins are under the microscope, and the new CEO&#39;s unfamiliarity with Hollywood could be a vulnerability as he navigates these shifting power dynamics.Disney+ faces a specific battle for younger viewers, a critical demographic. Despite its rapid growth, <a href="https://www.statista.com/statistics/1095372/disney-plus-number-of-subscribers-us/?srsltid=AfmBOor1VrgHP9Gqs7_xMmWLRnvXQ3bAXFkF-yuVhIAYnXePMG-Pzm2K" target='__blank'>Netflix remained the most-watched subscription video-on-demand service among U.S. children</a> as of October 2023, capturing 34% of the audience compared to Disney+&#39;s 31%. This gap shows the streaming war is far from won, especially in the crucial youth segment. The recent U.S. price increases are a direct response to this pressure, aiming to boost revenue per user while fighting to retain a foothold against a more entrenched rival.Against this backdrop, the new CEO&#39;s strategy will be scrutinized as the key defense. His push into AI for content creation, highlighted by CEO Bob Iger as an area of opportunity, is a direct play to defend Disney&#39;s IP advantage. The upcoming film slate, including major releases like &quot;The Devil Wears Prada 2,&quot; will be the ultimate test of whether this strategy can generate the blockbuster hits needed to sustain premium pricing and subscriber loyalty. In a consolidating industry, D&#39;Amaro must prove he can leverage Disney&#39;s vast library not just to produce hits, but to do so more efficiently and at scale. The market will be watching for any sign that his operational expertise can translate into a competitive edge in the creative and digital arms race.

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Disney's New CEO: Five Priced-In Problems for D'Amaro's Takeover

China in 2026: Resilient Growth Without Reflation1. Headline Growth Is Achievable, Nominal Growth Is NotView: China can still meet official growth targets, but growth quality continues to deteriorate.China is expected to launch the 15th Five-Year Plan with a 2026 growth target of “around 5%,” later reframed as “at least 4.5%.” Historically, the gap between official targets and realized growth has narrowed, indicating policymakers’ strong commitment to numerical stability (Figure 1.1: China GDP growth targets vs. actual growth).<img data-json="{&quot;id&quot;:&quot;ebddbf14-f729-4cb2-a302-a8b8f26224c3&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/e98e70e9-ce48-4e37-9415-393f15e251a7_image_d58c433d1770195897197.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/e98e70e9-ce48-4e37-9415-393f15e251a7_image_d58c433d1770195897197.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />However, the sustainability of this growth is undermined by entrenched deflation. Nominal GDP growth has persistently lagged real GDP growth, reflecting price compression rather than income expansion (Figure 1.3: Real vs. nominal GDP growth). This divergence weakens earnings growth, fiscal revenues, and debt dynamics, limiting asset re-rating potential.<img data-json="{&quot;id&quot;:&quot;83b17648-35f3-4a7c-9817-e8c85ddbd2b9&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/e23631d3-4d1c-4c4f-83e1-12381fe510a2_image_ce7918f71770195914979.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/e23631d3-4d1c-4c4f-83e1-12381fe510a2_image_ce7918f71770195914979.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />2. Advanced Manufacturing: Global Scale, Domestic Margin PressureView: China has secured manufacturing scale leadership, but excess capacity suppresses profitability.China’s manufacturing value-added now accounts for roughly 30% of the global total, exceeding the combined share of the US, Japan, and Germany (Figure 2.1: China’s share of global manufacturing). <img data-json="{&quot;id&quot;:&quot;9f80ff96-0570-44d8-8338-0b7a2612c6f1&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/812cfb6b-5bd7-4acd-abab-ecfdaa9f7a35_image_49e7ef231770195957451.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/812cfb6b-5bd7-4acd-abab-ecfdaa9f7a35_image_49e7ef231770195957451.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />Export gains have been particularly strong in green tech, EVs, and industrial equipment (Figure 2.2: China’s share of global high-end manufacturing exports).<img data-json="{&quot;id&quot;:&quot;f69469f6-6b21-4b9c-9d4e-08862d156f44&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/6f9f4c2a-4a20-480b-8208-ad353ac00330_image_51f057cc1770195971136.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/6f9f4c2a-4a20-480b-8208-ad353ac00330_image_51f057cc1770195971136.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />This scale advantage is reinforced by China’s dominance in industrial automation, with over half of global industrial robot installations occurring domestically (Figure 2.5: Global industrial robot installations by country). Yet these same dynamics have intensified competition and price pressure, reinforcing PPI deflation rather than supporting margin expansion.<img data-json="{&quot;id&quot;:&quot;de3747e9-7447-4182-a92e-65a3c1268081&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/57284df4-3ff8-464d-8ae1-ce9b8efb0963_image_cf6afb921770195981515.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/57284df4-3ff8-464d-8ae1-ce9b8efb0963_image_cf6afb921770195981515.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />3. Exports Remain the Key Upside—but With a Lower CeilingView: Exports can stabilize growth, but face rising structural constraints.Net exports were the largest contributor to China’s GDP growth upside in 2025 and remain the main upside risk in 2026 (Figure 3.4: GDP growth contribution by component). China’s cost-efficient manufacturing base continues to support external competitiveness despite slowing global trade.<img data-json="{&quot;id&quot;:&quot;6f1a73dc-cf58-4cda-b37a-a5ac87655322&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/641c77b3-3af3-4ca0-b254-1fc8f63f4f7d_image_525336601770196015919.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/641c77b3-3af3-4ca0-b254-1fc8f63f4f7d_image_525336601770196015919.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />At the same time, trade frictions are rising sharply. The number of global trade remedy cases against China has surged, dominated by anti-dumping actions (Figures 3.5 &amp; 3.6: Global trade remedy cases against China). These barriers increasingly cap China’s ability to rely on export-led growth without escalating geopolitical tensions.<img data-json="{&quot;id&quot;:&quot;5967a08f-93d5-46b9-95fd-bd1520bd169b&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/afc6a1eb-d584-4621-84a9-056468cd83fe_image_c3fc5e5b1770196028663.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/afc6a1eb-d584-4621-84a9-056468cd83fe_image_c3fc5e5b1770196028663.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" /><img data-json="{&quot;id&quot;:&quot;02c8de6a-81af-46b9-9eb9-c3365145e6a4&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/4b294947-6156-4bca-adf6-f944a70707d5_image_88a196cc1770196044554.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/4b294947-6156-4bca-adf6-f944a70707d5_image_88a196cc1770196044554.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />4. Fiscal Policy Is Active—but Skewed Toward SupplyView: Fiscal easing supports growth stability, not demand reflation.Fiscal policy in 2026 will remain expansionary, with an augmented deficit exceeding 11% of GDP. However, the incremental fiscal impulse remains modest relative to the scale of the demand shortfall (Figure 4.2: Fiscal stance and fiscal thrust).<img data-json="{&quot;id&quot;:&quot;1ce72464-7072-4ac8-91c2-7c14858fe0c4&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/fa0cf4b5-aa6d-49ab-bc43-98950bb141f2_image_94512c731770196076795.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/fa0cf4b5-aa6d-49ab-bc43-98950bb141f2_image_94512c731770196076795.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />Direct fiscal support for household consumption is projected at only around 0.5% of GDP, with most measures focused on trade-in subsidies and targeted transfers (Table 4.2: Fiscal support for consumption). This allocation explains why repeated fiscal easing has stabilized growth without reversing deflation.<img data-json="{&quot;id&quot;:&quot;d01ec33b-3e8c-4ee8-b7bd-e098dc8070c1&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/77ad3377-6f91-43b6-9a45-ce58f823dd01_image_8a1330851770196104129.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/77ad3377-6f91-43b6-9a45-ce58f823dd01_image_8a1330851770196104129.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />5. Anti-Involution Policies Risk Prolonging DeflationView: Administrative price controls improve margins temporarily but delay adjustment.Campaign-style anti-involution policies intensified in 2025, coinciding with persistent margin compression and PPI deflation (Figure 5.1: Anti-involution policy intensity index). These measures have narrowed price declines in selected sectors but at the cost of slower inventory clearance.<img data-json="{&quot;id&quot;:&quot;979bfb6d-f62b-479a-9922-c268ca8783db&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/6b6d5d0f-82b6-4d33-82a0-9a1ddf0b7fa0_image_4f9027771770196122086.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/6b6d5d0f-82b6-4d33-82a0-9a1ddf0b7fa0_image_4f9027771770196122086.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />Industrial profit data show that price suppression delays consolidation and prolongs deflationary dynamics (Figure 5.2: Industrial profit growth decomposition). Without structural reforms, such policies risk repeating the housing sector’s prolonged adjustment path.<img data-json="{&quot;id&quot;:&quot;407f14ba-e573-45d7-a592-c9756245159f&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/37114b73-24e3-4316-bdfd-7d3b0228b911_image_195c4c6a1770196134671.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/37114b73-24e3-4316-bdfd-7d3b0228b911_image_195c4c6a1770196134671.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />6. Deflation Is Broad-Based and PersistentView: China is unlikely to achieve a durable reflation in 2026.China’s GDP deflator has remained negative for more than a decade’s worst historical episode, reflecting a widening gap between production and consumption. CPI inflation is expected to recover only modestly, while PPI deflation remains entrenched.Deflation has spread across upstream, midstream, and downstream sectors, making this episode broader than the 2014–15 cycle (Figure 6.4: CPI, core CPI, and PPI trends). Without a policy pivot toward consumption, excess capacity will continue to suppress pricing power.<img data-json="{&quot;id&quot;:&quot;765b25b5-8ff9-4de3-b05f-6e3b3d0117f4&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/0b200f7a-01df-4c54-9c2f-9327d753adb1_image_1ba6e1ed1770196152992.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/0b200f7a-01df-4c54-9c2f-9327d753adb1_image_1ba6e1ed1770196152992.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />7. Housing: No Bottom Without Structural InterventionView: Incremental easing cannot end the housing correction.After nearly five years of adjustment, housing activity remains far below equilibrium. Policy easing has failed to translate into a sustained recovery in transactions or prices (Figure 7.1: Housing policy intensity vs. housing market activity).<img data-json="{&quot;id&quot;:&quot;12d80ae6-a6c4-48c2-8e36-50bb147333f0&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/07dc27c9-1f83-47dc-acea-392d5a6c1613_image_3698df671770196169219.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/07dc27c9-1f83-47dc-acea-392d5a6c1613_image_3698df671770196169219.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />Inventories remain elevated, price expectations are weak, and the sector continues to weigh on household wealth and local government finances. Without large-scale destocking, public housing conversion, or a central-government-led stabilization mechanism, the correction is likely to extend into 2026.Bottom Line for InvestorsChina in 2026 offers growth stability without reflation. Manufacturing strength and export competitiveness can prevent a hard landing, but persistent deflation, weak domestic demand, and policy bias toward supply cap upside for earnings and valuations. The investment case remains conditional, selective, and valuation-driven, rather than cyclical or broad-based.

Europe

Asia-Pacific

China

China 2026: Growth Targets Hold, Deflation Caps Returns

<h2>UPDATE: JinkoSolar Confirms Visit, Shares Hit 20% Limit</h2>In a significant development, a JinkoSolar representative officially confirmed to local media that the company recently hosted Musk&#39;s delegation to inspect &quot;technology reserves and production equipment.&quot; The representative further noted that &quot;mainstream domestic photovoltaic enterprises were also visited,&quot; though specific cooperation details remain confidential.Following this confirmation, JinkoSolar (688223.SH) surged in afternoon trading, hitting its 20% daily limit. This official validation has fueled speculation that a broader industry partnership is imminent, rather than an isolated event.<h2>UPDATE2: More Companies Released</h2>On February 4, industry insiders revealed that Musk’s team conducted site visits last week at TCL Zhonghuan, JinkoSolar, and Jingsheng Electromechanical. While the companies have not directly responded to verify these specific details, the inclusion of TCL Zhonghuan is critical for US investors: the firm is the controlling shareholder (&gt;50% stake following a 2024 restructuring) of Maxeon Solar Technologies (NASDAQ: MAXN), creating a direct link between this tour and a US-listed entity.<a href="https://finance.sina.com.cn/stock/marketresearch/2026-02-04/doc-inhkrihp9839659.shtml?froms=bdmp" target='__blank'>According to Sina Finance </a> close to the matter, Elon Musk’s team recently conducted a secret tour of top-tier Chinese photovoltaic enterprises, specifically targeting manufacturers specializing in Heterojunction (HJT) and Perovskite technologies. The team reportedly inspected production lines involving equipment, silicon wafers, and battery modules, with confirmed contacts stating that &quot;the content of the inspection needs to remain confidential&quot;.This move is a decisive, albeit controversial, masterstroke for Tesla (TSLA). While Washington tightens trade barriers, Musk is likely effectively shorting geopolitical friction to go long on energy physics. Tesla’s energy generation and storage division has long been margin-constrained by high Western component costs. By tapping into China’s hyper-efficient HJT and Perovskite supply chains, Tesla could potentially secure a cost advantage that US competitors—insulated by tariffs—cannot match. This isn&#39;t just a procurement trip; it&#39;s an attempt to secure the &quot;lithium&quot; of the next decade: high-efficiency solar cells.<visualization data='{&quot;components&quot;:[{&quot;show_type&quot;:&quot;jgyKline3&quot;,&quot;config&quot;:{&quot;codeName&quot;:&quot;name&quot;,&quot;marketTag&quot;:&quot;NASDAQ&quot;,&quot;variety&quot;:&quot;Stock&quot;,&quot;showBottom&quot;:true,&quot;moduleList&quot;:[&quot;MACD&quot;],&quot;maLine&quot;:[5,10,20,60]},&quot;title_config&quot;:{&quot;config&quot;:{&quot;display&quot;:true},&quot;data&quot;:{&quot;h1&quot;:&quot;Tesla (TSLA) Price&quot;}},&quot;data&quot;:{&quot;datas&quot;:[{&quot;code&quot;:&quot;TSLA&quot;,&quot;name&quot;:&quot;Tesla, Inc.&quot;,&quot;market_code&quot;:&quot;185&quot;}]},&quot;uuid&quot;:&quot;55a9cc75b3705fbd&quot;}],&quot;page&quot;:{&quot;layout&quot;:{&quot;layout_data&quot;:&quot;[{\&quot;showType\&quot;:\&quot;jgyKline3\&quot;,\&quot;uuid\&quot;:\&quot;55a9cc75b3705fbd\&quot;}]&quot;},&quot;render_for&quot;:&quot;aigc&quot;,&quot;tracking_info&quot;:{}}}' dataurl='undefined'></visualization><h2>The Great Wall of Silicon: Cost and Scale</h2>To understand why Musk is ignoring political headwinds, one must look at the spread in unit economics. As of early 2026, the cost disparity between US and Chinese solar modules is unignorable.China currently dominates over 80% of the global solar supply chain, from polysilicon to modules. While US protectionist policies have kept domestic module prices elevated—hovering around $0.25–$0.28 per watt due to tariffs—Chinese FOB (Free On Board) prices for top-tier modules have stabilized near a rock-bottom $0.08–$0.09 per watt.For a company like Tesla, which aims to deploy terawatt-scale energy storage and generation, this 3x cost difference is the difference between a niche product and global ubiquity. Musk’s &quot;Master Plan&quot; requires massive scale, and the data suggests that scale currently resides in China. Leading manufacturers like JinkoSolar (JKS) and Tongwei have ramped up capacity to levels where their &quot;marginal cost&quot; is effectively the global floor. By engaging directly with these giants, Tesla is likely signaling that it refuses to let its energy margins be dictated by US trade inefficiency.<img data-json="{&quot;id&quot;:&quot;10b5b0b2-1b56-434c-8690-4c5669b075af&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/e0ff116e-be53-4e24-8bba-368e1ecf206f_Musk Team Secretly Visits China Solar Which HJT &amp; Perovskite companies Were Targeted-1_1a326f811770177389174.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/e0ff116e-be53-4e24-8bba-368e1ecf206f_Musk Team Secretly Visits China Solar Which HJT &amp; Perovskite companies Were Targeted-1_1a326f811770177389174.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" /><h2>Heterojunction (HJT): The Efficiency Play</h2>The specific interest in Heterojunction (HJT) technology reported in the visit is particularly telling. HJT is not just a buzzword; it is the natural successor to the current PERC and TOPCon standards, offering higher conversion efficiencies (often exceeding 25-26%) and lower degradation rates over time.For Tesla’s Megapack and Powerwall ecosystem, energy density is paramount. HJT cells perform better in hot climates (lower temperature coefficient) and offer superior bifaciality (generating power from the back side), making them ideal for utility-scale projects where land and balance-of-system (BOS) costs are high.China is currently the undisputed leader in HJT mass production. Companies like Huasun Energy and Risen Energy have been aggressive in scaling HJT gigafactories, driving down the &quot;green premium&quot; of this advanced tech. If Musk secures a supply of low-cost HJT cells, he could increase the energy density of Tesla’s solar roof and commercial installations without increasing the physical footprint—a critical factor for residential adoption.<h2>Perovskite: The &quot;Holy Grail&quot; for Tesla’s Ecosystem</h2>Perhaps the most intriguing detail is the team&#39;s focus on Perovskite . This technology is often called the &quot;holy grail&quot; of solar because it can be printed on flexible substrates and theoretically offers higher efficiencies than silicon when used in tandem layers.Why is Musk interested? Three words: Vehicle Integrated Photovoltaics (VIPV).Current silicon cells are rigid and heavy, making them difficult to integrate into the curved, aerodynamic surfaces of a Model Y or the upcoming Cybercab. Perovskites, however, can be flexible and translucent. Leading Chinese players like GCL Perovskite (a subsidiary of GCL Tech) and UtmoLight have been pushing the boundaries of commercial viability, moving from lab records to pilot production lines.Imagine a Tesla Cybercab coated in a &quot;solar skin&quot; that adds 20-30 miles of range per day, or Starlink terminals with integrated, lightweight power sources. The synergy is obvious. While US firms like First Solar are researching this, Chinese companies are arguably faster at moving to the &quot;pilot manufacturing&quot; phase. A partnership here would give Tesla a proprietary edge in EV efficiency that no other automaker could easily replicate.<img data-json="{&quot;id&quot;:&quot;3df638ed-e46a-42dc-958e-940fd9f0f3b3&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/4dc11ea0-3926-4fa7-8387-a12c04d7c897_Musk Team Secretly Visits China Solar Which HJT &amp; Perovskite companies Were Targeted_122e43b91770177512380.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/4dc11ea0-3926-4fa7-8387-a12c04d7c897_Musk Team Secretly Visits China Solar Which HJT &amp; Perovskite companies Were Targeted_122e43b91770177512380.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" /><h2></h2><h2>Market Reaction：China’s Solar Sector Ignites on &quot;Musk Narrative&quot;</h2>The confirmation of the secret visit, combined with Musk&#39;s newly announced ambition to deploy 200GW of photovoltaic capacity and establish space-based data centers following SpaceX&#39;s acquisition of xAI, set off a powder keg in the Chinese market on February 4. Investors aggressively repriced assets linked to HJT, Perovskite, and the emerging &quot;Space Solar&quot; concept, betting that Musk’s aggressive targets cannot be met without the scale and technology of Chinese supply chains.The &quot;Space Solar&quot; &amp; HJT Rally The &quot;Space Photovoltaic&quot; concept sector led the charge, rising over 3% by mid-morning. The market reaction was highly specific, favoring companies with advanced cell technology suitable for high-efficiency and extraterrestrial applications:<ul><li>Jolywood (300393.SZ): A leader in n-type technology, hit its 20% daily limit immediately.</li><li>Shuangliang Eco-Energy: Recorded its second consecutive daily limit up, signaling sustained capital inflow into solar equipment providers.</li><li>Junda Shares (02865.HK): Rallied over 6% in Hong Kong trading with heavy volume. Junda is a prime example of the &quot;Musk speculation trade&quot;; the company recently signed a strategic agreement to develop flexible perovskite technology for space energy and invested in CPI film production for low-orbit satellite applications. This aligns perfectly with the reported interest of Musk’s team in flexible perovskite solutions during their tour.</li></ul><h2>Conclusion</h2>Elon Musk has never played by conventional rules. While Washington builds walls around the US solar market, Musk is building bridges to where the technology and capacity actually exist. This secret visit to China’s HJT and Perovskite leaders signals that Tesla is prioritizing physics and economics over geopolitics.For investors, the trade is clear: the &quot;China discount&quot; on stocks like JinkoSolar and GCL may be irrational if they become critical suppliers to the world’s most valuable energy company. Meanwhile, the &quot;protectionism premium&quot; on US solar stocks looks increasingly fragile in the face of raw economic gravity.

Solar Energy

Photovoltaic

JinkoSolar Holding

Maxeon Solar

Musk Team Secretly Visits China Solar: Which HJT & Perovskite companies Were Targeted?

Anthropic’s Claude Cowork platform has launched a legal automation tool capable of handling multiple legal tasks, including contract review, brief drafting, and automated responses. The announcement triggered sharp sell-offs across U.S. software stocks, dragging the Nasdaq lower. Legal-software heavyweight Thomson Reuters plunged 15%.<visualization data='{&quot;components&quot;:[{&quot;uuid&quot;:&quot;c8dfb3d8a678b3f9&quot;,&quot;config&quot;:{&quot;image&quot;:&quot;https://lh-prod-mid-pub-newsf10.s3.amazonaws.com/logo/TRI.png&quot;,&quot;marketTag&quot;:&quot;NASDAQ&quot;,&quot;show_type_id&quot;:702,&quot;tradeClass&quot;:&quot;closed&quot;,&quot;title&quot;:&quot;KxxV2&quot;,&quot;fsType&quot;:&quot;closed&quot;,&quot;showBottom&quot;:true,&quot;showCodeContrast&quot;:false,&quot;score&quot;:20,&quot;show_type&quot;:&quot;kline3&quot;,&quot;maLine&quot;:[5,10,30,60],&quot;moduleList&quot;:[],&quot;variety&quot;:&quot;stock&quot;,&quot;scoreRuleNames&quot;:&quot;&quot;,&quot;tradeStatus&quot;:&quot;trading&quot;,&quot;codeName&quot;:&quot;Name&quot;,&quot;klineDefaultType&quot;:&quot;fs&quot;,&quot;title_config&quot;:{&quot;config&quot;:{&quot;display&quot;:true,&quot;display2&quot;:false,&quot;txt_style&quot;:0,&quot;url&quot;:&quot;&quot;},&quot;data&quot;:{&quot;h1&quot;:&quot;TRI Trend&quot;,&quot;h2&quot;:&quot;&quot;},&quot;show_type&quot;:&quot;title1&quot;}},&quot;data&quot;:{&quot;chunks_info&quot;:&quot;[]&quot;,&quot;code_count&quot;:1,&quot;columns&quot;:[{&quot;index_name&quot;:&quot;market_code&quot;,&quot;key&quot;:&quot;market_code&quot;,&quot;label&quot;:&quot;market_code&quot;,&quot;type&quot;:&quot;STR&quot;},{&quot;index_name&quot;:&quot;code&quot;,&quot;key&quot;:&quot;code&quot;,&quot;label&quot;:&quot;hq_code&quot;,&quot;source&quot;:&quot;fixed_index&quot;,&quot;type&quot;:&quot;STR&quot;},{&quot;domain&quot;:&quot;abs_xxxxxx&quot;,&quot;feKey&quot;:&quot;Ticker&quot;,&quot;index_name&quot;:&quot;Ticker&quot;,&quot;key&quot;:&quot;Ticker&quot;,&quot;label&quot;:&quot;code&quot;,&quot;origin_index&quot;:&quot;stock code&quot;,&quot;source&quot;:&quot;fixed_index&quot;,&quot;type&quot;:&quot;STR&quot;,&quot;unit&quot;:&quot;&quot;},{&quot;domain&quot;:&quot;abs_xxxxxx&quot;,&quot;feKey&quot;:&quot;Name&quot;,&quot;index_name&quot;:&quot;Name&quot;,&quot;key&quot;:&quot;Name&quot;,&quot;label&quot;:&quot;name&quot;,&quot;origin_index&quot;:&quot;stock name&quot;,&quot;source&quot;:&quot;fixed_index&quot;,&quot;type&quot;:&quot;STR&quot;,&quot;unit&quot;:&quot;&quot;},{&quot;feKey&quot;:&quot;Date&quot;,&quot;index_name&quot;:&quot;Date&quot;,&quot;key&quot;:&quot;Date&quot;,&quot;label&quot;:&quot;date&quot;,&quot;origin_index&quot;:&quot;Date&quot;,&quot;type&quot;:&quot;DATE&quot;},{&quot;domain&quot;:&quot;abs_xxxxxx&quot;,&quot;feKey&quot;:&quot;Closing Price&quot;,&quot;index_name&quot;:&quot;xxxx@Closing Price&quot;,&quot;key&quot;:&quot;Closing Price&quot;,&quot;label&quot;:&quot;NoIndent&quot;,&quot;report_type&quot;:&quot;TRADE_DAILY&quot;,&quot;source&quot;:&quot;&quot;,&quot;timestamp&quot;:&quot;&quot;,&quot;type&quot;:&quot;DOUBLE&quot;,&quot;unit&quot;:&quot;USD&quot;}],&quot;condition&quot;:&quot;[{\&quot;sonSize\&quot;:2,\&quot;opName\&quot;:\&quot;and\&quot;,\&quot;relatedSize\&quot;:0},{\&quot;sonSize\&quot;:0,\&quot;indexName\&quot;:\&quot;xxxx@stock code\&quot;,\&quot;indexProperties\&quot;:[\&quot;EQUAL TRI.O\&quot;],\&quot;indexPropertiesMap\&quot;:{\&quot;EQUAL\&quot;:\&quot;TRI.O\&quot;},\&quot;domain\&quot;:\&quot;abs_xxxxxx\&quot;,\&quot;relatedSize\&quot;:0},{\&quot;sonSize\&quot;:0,\&quot;indexName\&quot;:\&quot;xxxx@Closing Price\&quot;,\&quot;indexProperties\&quot;:[\&quot;xxxxxx 20260203\&quot;,\&quot;xxxxxx 20260203\&quot;],\&quot;indexPropertiesMap\&quot;:{\&quot;xxxxxx\&quot;:\&quot;20260203\&quot;,\&quot;xxxxxx\&quot;:\&quot;20260203\&quot;},\&quot;domain\&quot;:\&quot;abs_xxxxxx\&quot;,\&quot;relatedSize\&quot;:0}]&quot;,&quot;dataSize&quot;:1,&quot;datas&quot;:[{&quot;code&quot;:&quot;TRI&quot;,&quot;Ticker&quot;:&quot;TRI.O&quot;,&quot;market_code&quot;:&quot;185&quot;,&quot;Closing Price&quot;:&quot;91.95&quot;,&quot;Date&quot;:&quot;20260203&quot;,&quot;Name&quot;:&quot;Thomson Reuters&quot;}],&quot;meta&quot;:{&quot;extra&quot;:{}},&quot;row_count&quot;:1,&quot;status_code&quot;:0,&quot;status_msg&quot;:&quot;ok&quot;},&quot;category&quot;:&quot;generic&quot;,&quot;chart_type&quot;:&quot;&quot;,&quot;show_type&quot;:&quot;jgyKline3&quot;,&quot;title_config&quot;:{&quot;config&quot;:{&quot;display&quot;:true,&quot;display2&quot;:false,&quot;txt_style&quot;:0,&quot;url&quot;:&quot;&quot;},&quot;data&quot;:{&quot;h1&quot;:&quot;TRI Trend&quot;,&quot;h2&quot;:&quot;&quot;},&quot;show_type&quot;:&quot;title1&quot;},&quot;support_refresh&quot;:false,&quot;data_config&quot;:{&quot;data_ext_params&quot;:{},&quot;query_type&quot;:&quot;intusstock&quot;}}],&quot;global&quot;:{&quot;query_type&quot;:&quot;intusstock&quot;},&quot;page&quot;:{&quot;language&quot;:&quot;&quot;,&quot;layout&quot;:{&quot;layout_data&quot;:&quot;[{\&quot;showType\&quot;:\&quot;jgyKline3\&quot;,\&quot;uuid\&quot;:\&quot;c8dfb3d8a678b3f9\&quot;}]&quot;},&quot;render_for&quot;:&quot;aigc&quot;},&quot;data_config&quot;:{&quot;data_ext_params&quot;:{},&quot;query_type&quot;:&quot;intusstock&quot;}}' dataurl='undefined'></visualization>Market concerns are not unfounded.Claude has become a preferred analytical tool for many legal and financial professionals. <a href="https://www.businessinsider.com/andrew-left-short-seller-securities-fraud-legal-defense-claude-ai-2025-12" target='__blank'>According to Business Insider</a>, well-known short seller Andrew Left used the tool while researching a litigation case. This growing acceptance among professionals makes Anthropic’s legal-focused AI features a more direct threat to incumbent legal software providers.Beyond the legal sector, AI’s disruptive impact on the broader software ecosystem is becoming increasingly evident. German enterprise software giant SAP, once Europe’s most valuable company, recently issued weak guidance, sending its shares down nearly 40% over the past six months.Google DeepMind recently unveiled Project Genie, a tool that could fundamentally change how video games are developed. The announcement sparked a broad sell-off in gaming stocks, with Unity plunging more than 20% in a single day.Earnings season has further confirmed the pressure AI is placing on software stocks. <a href="https://www.bloomberg.com/news/articles/2026-02-03/legal-software-stocks-plunge-as-anthropic-releases-new-ai-tool?embedded-checkout=true" target='__blank'>Bloomberg data shows</a> that among S&amp;P 500 software companies that have reported results, only 71% beat revenue expectations, compared with 85% across the broader technology sector.Market Leaders Still Have Moats: Data, Licenses, and NetworksDespite the sharp sell-off, leading software companies continue to possess deep competitive moats within their respective domains. Thomson Reuters remains deeply entrenched in the legal industry through Westlaw, a proprietary database containing more than a century of U.S. case law and nearly two billion legal documents. Investors widely view Westlaw as the crown jewel of its legal business—an asset AI simply cannot replicate.In highly specialized industries such as law, professional licensing is mandatory—something AI fundamentally lacks. Anthropic itself has warned that AI-generated legal analysis must be reviewed by licensed attorneys before being used in legal decision-making.As for gaming, analysts argue that the recent collapse in gaming stocks largely overlooks the importance of creativity, social interaction, and network effects in open-world games. Investors fear Google’s AI tools could erode Unity’s market share—about 70% of the world’s top 1,000 mobile games are built with Unity tools—yet Unity has already embedded similar AI capabilities. These concerns, analysts say, are “overstated.”Google’s AI tool is “unlikely to pose a near-term threat to EA, Take-Two, Roblox, or Unity,” though it could become a long-term risk if it evolves into a fully commercialized game-production platform.Has Smart Money Moved Early?Goldman Sachs prime brokerage data shows hedge funds have cut their net exposure to software stocks to 4.5%, the lowest level since 2019, while boosting net exposure to semiconductors to 8%—a complete reversal.<img data-json="{&quot;id&quot;:&quot;57f7abed-698a-4eb6-a7a8-bda978fd555d&quot;,&quot;type&quot;:&quot;image&quot;,&quot;alt&quot;:&quot;&quot;,&quot;children&quot;:[{&quot;text&quot;:&quot;&quot;}],&quot;src&quot;:&quot;https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/9463efff-d281-4dee-8cc6-db5c1ad5b2ec_image_b6c1fb221770170450913.png&quot;}" src="https://cdn.ainvest.com/articles/focusnews/coverimage/content/pictures/9463efff-d281-4dee-8cc6-db5c1ad5b2ec_image_b6c1fb221770170450913.png" contentEditable="false" style="display: block; margin: 0 auto; maxWidth: 100%" />This shift can be interpreted in two ways. If AI truly disrupts the software industry, hedge funds’ repositioning appears prudent, helping them avoid a potential major correction in SaaS stocks. Alternatively, semiconductor trades may now be overcrowded, while software stocks have been oversold. If AI ultimately fails to dismantle software business models, hedge funds could rotate back aggressively, driving a meaningful valuation re-rating.

us_low_importance

SaaS

Thomson Reuters

Unity

AI Shock Sparks Software Rout — A Dip-Buying Setup?

The Instinct MI450 represents a fundamental shift in AMD's strategic posture. It is not merely another product update; it is the cornerstone of a new infrastructure layer designed to capture the exponential growth of the AI paradigm. At its Financial Analyst Day last November, AMD laid out a bold vision: a <a href="https://www.amd.com/en/newsroom/press-releases/2025-11-11-amd-unveils-strategy-to-lead-the-1-trillion-compu.html">revenue compound annual growth rate (CAGR) in excess of 35%</a> over the next several years, targeting greater than $20 non-GAAP EPS. This aggressive growth plan is predicated on capturing a <a href="https://leverageshares.com/us/insights/amd-to-380-analysts-are-hiking-their-2026-price-targets/">"double-digit share"</a> of a data center market that AMD now projects will exceed $1 trillion by 2030. The MI450 is central to this bet, aiming to close the compute power gap in the foundational layer of AI infrastructure.<img src="https://cdn.ainvest.com/aigc/hxcmp/images/compress-qwen_generated_1770171414368.jpg.png" style="max-width:100%;"/>This ambition is underpinned by a critical technological leap: the MI450 will be the first AMD AI GPU manufactured on TSMC's <a href="https://www.tomshardware.com/tech-industry/artificial-intelligence/amd-could-beat-nvidia-to-launching-ai-gpus-on-the-cutting-edge-2nm-node-instinct-mi450-is-officially-the-first-amd-gpu-to-launch-with-tsmcs-finest-tech">N2 (2nm-class) fabrication technology</a>. This move marks a decisive break from AMD's historical reliance on older, more mature nodes for its AI accelerators. The potential payoff is significant. TSMC's N2 node promises tangible advantages, including a 10% to 15% performance improvement at the same power or complexity, or a 25% to 30% power reduction at the same frequency. Compared to Nvidia's upcoming Rubin GPUs, which are set to use N3, this could provide AMD with a crucial performance and efficiency edge. It's a first principles play on the physical layer of compute.The bottom line is that the MI450's success hinges on flawless execution. AMD is betting that its migration to the leading-edge N2 node, combined with its open "Helios" rack-scale systems and the ROCm software platform, will create a compelling, end-to-end stack. If it works, this infrastructure layer could disrupt Nvidia's current lead. But the path is narrow. The company must deliver on its 2nm technology promise, achieve software parity, and scale production to meet the demands of a market moving at an exponential pace. The MI450 is AMD's bid to build the rails for the next computing paradigm.<h2>Execution Risk: The 2nm Timeline and Software Gap</h2>The MI450's path to exponential adoption is fraught with execution risks that could derail AMD's entire infrastructure bet. The most immediate pressure point is the timeline for its foundational 2nm technology. Reports from SemiAnalysis last week suggested the MI450-series chips were <a href="https://finance.yahoo.com/news/amd-stock-falls-mi450-series-161808447.html">behind schedule</a>, sending AMD's stock down as much as 6% in a single session. This near-term volatility highlights the market's sensitivity to any delay in a product that is central to the company's growth narrative. The stock's subsequent partial recovery, as Wells Fargo analysts countered that development is on track with completed tape-out and EPYC sample shipments, shows how quickly sentiment can swing on these technical milestones.<visualization data='{"components":[{"show_type":"jgyNewLowcode","config":{"type":"iwcapp/stockBackTestTool","version":"0.0.3","url":"//cdn.ainvest.com/frontResources/s/foiegras/stockBackTestTool/0.0.3/stockBackTestTool@0.0.3index.js"},"data":{"columns":[{"index_name":"strategy_basic_info","key":"strategy_basic_info","type":"Object"},{"index_name":"backtest_condition","key":"backtest_condition","type":"Object"},{"index_name":"backtest_result","key":"backtest_result","type":"STR"}],"datas":[{"strategy_basic_info":{"name":"Absolute Momentum Long-Only Strategy","description":"Go long AMD when 252-day ROC &gt; 0 and close &gt; 200-day SMA. Exit when close &lt; 200-day SMA, or after 20 trading days, or take-profit +8%, or stop-loss −4%. Backtest period: 2024-02-03 to 2026-02-03."},"backtest_condition":{"object":{"display_name":"Object","type":"ticker","ticker":["AMD"]},"open_signal":{"display_name":"Open Signal","type":"criteria","criteria":"252-day ROC &gt; 0 and close &gt; 200-day SMA"},"sell_signal":{"display_name":"Close Signal","type":"criteria","criteria":"close &lt; 200-day SMA, or after 20 trading days, or TP +8%, or SL −4%"},"risk_control":{"display_name":"Risk Control","parameters":{"take_profit":{"display_name":"Take-Profit","value":8,"unit":"%"},"stop_loss":{"display_name":"Stop-Loss","value":4,"unit":"%"},"max_holding_days":{"display_name":"Hold Days","value":20}}}},"backtest_result":"https://cdn.ainvest.com/backtest/agent/session/784562/1800109709/088d03e0-ba4a-40bc-8de9-ee2d9dd8a432/amd_abs_mom_backtest_result_20240203_20260203.json"}]},"uuid":"1770171516958"}],"page":{"layout":{"layout_mode":"grid","layout_data":"[{\"uuid\": \"1770171516958\", \"show_type\": \"jgyNewLowcode\"}]"}}}'></visualization>The core of this risk is the sheer complexity of manufacturing at the leading edge. TSMC's N2 node is unproven for high-volume AI accelerator production, and any yield or ramp issues would directly impact AMD's ability to meet its volume production target for the second half of 2026. For a company betting its future on capturing a "double-digit share" of a trillion-dollar market, a delay of even a quarter could be costly. It would allow Nvidia to further solidify its lead and give competitors more time to close the gap.<visualization dataurl="https://cdn.ainvest.com/news/visual/visual_components/viz_zmmm0rp0.json"></visualization>Beyond the fabrication timeline, a more persistent vulnerability is the software stack. Even if the hardware delivers, AMD's ROCm platform still lags far behind Nvidia's CUDA in developer usability and ecosystem breadth. As noted in a recent analysis, the company has made <a href="https://newsletter.semianalysis.com/p/amd-2-0-new-sense-of-urgency-mi450x-chance-to-beat-nvidia-nvidias-new-moat">rapid progress</a> over the past four months, adding MI300X to PyTorch CI/CD and launching a developer relations function. Yet, critical inference features and full system-level integration remain underdeveloped. The report underscores a fundamental mismatch: AMD's internal development clusters have seen significant improvements, but they still operate with a fraction of the GPU resources Nvidia commands. This creates a vicious cycle where software development cannot keep pace with hardware innovation, slowing the adoption curve.The bottom line is that the MI450's success depends on a flawless dual execution: hitting the 2nm manufacturing target while simultaneously closing the software gap. The stock's recent choppiness reflects this binary risk. For investors, the setup is clear. The company is in a wartime stance, but the battles for process maturity and software parity are far from won. Any stumble in either domain could compress the narrow window where the MI450 is positioned to disrupt.<h2>Financial Impact and Valuation Trajectory</h2>The MI450's potential is now the central story for AMD's stock price. The company's shares have already run <a href="https://leverageshares.com/us/insights/amd-to-380-analysts-are-hiking-their-2026-price-targets/">up around 90% year-to-date</a>, a move that has priced in a massive amount of optimism. Wall Street's average price target implies only about 20% upside to roughly $277. This leaves little room for error; the valuation now reflects a high-conviction bet that AMD can execute flawlessly on both its hardware and software fronts.For that bet to pay off, the MI450 must drive a steep revenue ramp. The company's own financial targets are the benchmark. To achieve its revenue compound annual growth rate (CAGR) in excess of 35% over the next several years, AMD needs to hit a critical inflection point. Analysts point to a specific milestone: <a href="https://finance.yahoo.com/news/amd-stock-falls-mi450-series-161808447.html">more than $35 billion in data center GPU revenue by 2027</a>. That target is not a distant fantasy; it is the financial engine for the entire growth narrative. The MI450 is the key to that engine, and its success hinges on volume production in the second half of 2026, with shipments weighted toward the fourth quarter.This creates a narrow, binary window. The stock's recent volatility, including a 6% single-session decline on delay rumors, shows how sensitive the setup is. If the MI450 misses its 2026 timeline or fails to gain software traction, the path to $35B in data center GPU revenue becomes much steeper. The valuation, already elevated, would likely compress sharply. Conversely, a clean execution-on the 2nm node, with ROCm catching up, and with Helios systems shipping as planned-could accelerate the adoption curve and validate the current premium.The bottom line is that AMD's valuation trajectory is now a direct function of the MI450's adoption rate. The stock's 90% run has bought the company a lot of time, but it has also set a high bar. 2026 is no longer just a year of growth; it is a proving ground where the company must demonstrate it can deliver on its infrastructure bet. Any stumble in hitting the volume target for the MI450 would challenge the entire exponential growth story that the market is now paying for.<h2>Catalysts and Watchpoints for 2026</h2>The coming year is a proving ground. The MI450 thesis now hinges on a series of specific events and metrics that will validate or invalidate AMD's infrastructure bet. The primary catalyst is the company's next earnings report, where management must reaffirm confidence in the MI450 timeline and software progress. After a <a href="https://finance.yahoo.com/news/amd-stock-falls-mi450-series-161808447.html">6% single-session decline</a> on delay rumors last week, the stock's stability will depend on clear, credible guidance. Wells Fargo's analyst, who countered the delay claims, expects AMD to reaffirm its confidence during this report, setting the tone for the quarter.Key watchpoints will be the quality of MI450 samples and early customer feedback. The chips are slated for volume production in the second half of 2026, with significant shipments weighted toward the fourth quarter to major partners like OpenAI and Oracle. Any sign of yield issues or performance falling short of the promised 2nm-class advantages would be a major red flag. More broadly, investors must monitor the rate of software stack maturation. While AMD has made <a href="https://newsletter.semianalysis.com/p/amd-2-0-new-sense-of-urgency-mi450x-chance-to-beat-nvidia-nvidias-new-moat">rapid progress</a> on its AI software stack in the past four months, the real test is whether ROCm can match the usability and ecosystem breadth of CUDA in time for the MI450's launch. The company's internal development clusters still operate with a fraction of the GPU resources Nvidia commands, creating a bottleneck for software development.Finally, the competitive landscape is a critical variable. The MI450's 2nm advantage over Nvidia's upcoming Rubin GPUs is only meaningful if it translates to real-world adoption. Investors must watch for any shift in Nvidia's roadmap or competitive dynamics. The window for AMD to catch up is narrow, opening in the second half of 2026 with the MI450's rack-scale solution. If Nvidia accelerates its own timeline or introduces a more compelling alternative, AMD's 2nm edge could be neutralized before it gains traction. The bottom line is that 2026 is not about hype; it is about execution. The stock's premium valuation demands flawless delivery on hardware, software, and customer adoption.

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