APAC Wrap: 17 July 2026
You might have noticed that this newsletter has been more muted about new ideas since June, and that there has not been a post dedicated to a standalone idea or theme since May.
We’re committed to presenting a balanced view, even if it comes at the expense of clicks. As we entered the second half of the year, my conversations with experts and investors surfaced questions that were indicative of a more cautious posture. In particular, there was a growing concern that frontier labs may not be as good a business as advertised, coupled with uncertainty about the implications for the AI buildout.
We then saw more model competition in the form of Grok 4.5, a surge of investor interest in hyperscaler capex plans, followed by concerns about memory costs being too high.
Funda quickly addressed the Meta Cloud concerns, but it seemed to dominate the conversations with clients for an entire week.
Funda’s view on Grok catching up is that it is bullish for compute, and the firm continues to argue that fundamentals are unchanged.
I have had the benefit on sitting in on some calls and reviewing transcripts of others, and as recently as this week we have an expert reiterating memory tightness out to 2028, coupled with an expectation that any retreat in NAND pricing thereafter would be modest. We’re looking forward to making this repository of information more powerful through the new search function. In theory, you should be able to ask any question of the Funda platform and get a view informed by Funda’s proprietary data.
TSMC: Committing 100b to Arizona and raising capex guidance
TSMC - the most prudent and well informed market participant - raised capex guidance.
The reaction to relatively good earnings from TSMC and ASML suggests, and this is my personal view, that we need to go lower and that the next checkpoint will be just before Google’s earnings next week.
When asked to break down capex, CC Wei called out testers:
We try very hard to make sure that our CapEx number is correct, but with the flexibility between the front-end and the back-end. Sometimes we have a bottleneck. So we put more money to buy the bottleneck tools.
For long term, I mean, that's the back end, is about 10 to 20%… actually, I'm very honest to tell you that as time goes by, some of the customers' product need more tester. You cannot believe that. I mean, so the tester in shortage, so we have to put more CapEx in the tester or in the packaging or in other areas.
…
the most important reason [for capex guidance increase] is because of the demand continued to increase, and we feel the pressure from the customer to drive TSMC, not drive actually, to cooperate with TSMC for the capacity increase. That's one of the major reasons. The second reason is inflation. Now we buy the tools with inflation price, okay?
Xi promises AI for all (BBG)
China continues to paint itself as the mirror image of the United States, capitalizing on the recent Fable export controls.
The US and China appear to be running two different AI races, and the uncomfortable question this raises is whether the US should continue inflating its training costs to train next generation models when good enough models can evidently be trained under the constraints faced by the Chinese.
Google Gemini Launch Delayed (BBG)
Some dirty laundry being aired by 10 current and former employees in this article.
…encouraging leadership of every department to move in the same direction is like trying to boil an ocean, one ex-employee said. When mandates shift or efforts end up duplicated in multiple departments, it gets even more difficult to maintain a cohesive strategy, current and former employees said. It’s also a challenge for any one offering to get the resources it would need to succeed, and to gain traction in the market, they said.
Montage Technology positive pre (PR)
In the first half of 2026, the Company expects to achieve a substantial increase in operating results, primarily benefit from the AI industry trend and strong market demand. On the one hand, as the penetration of DDR5 products rose with continuous iterations of their sub-generation, shipments of the Company’s DDR5 RCD chips have increased significantly, with the portion of shipments of Gen3 RCD chips and Gen4 RCD chips further rising. On the other hand, revenue from new interconnect products including MRCD/MDB, PCIe Retimer, CKD and CXLMXC chips has grown significantly. In the first half of 2026, revenue from interconnect chips of the Company reached approximately RMB3,111 million, representing an increase of around 26.4% period-to-period, in particular the revenue from interconnect chips in the second quarter reached approximately RMB1,694 million, representing an increase of around 28.2% period-to-period and of around 19.5% quarter-on-quarter.
Highlights from the chat this week
Tsmc/ASML great earnings, terrible reaction. All of the data is showing that this factor unwind is historical about -30% (varies by broker) in 17 trading days. Typically, this drawdown is -22% over 33 days with the worst being a -40 in 2021.
I think what caught ppl off guard was the lack of a fundamental reason for the quick drawdown
Lack of long only buying exacerbating the unwind: