Weekly Insights: U.S. Inflation Cools Surprisingly, Positive Developments in U.S.-China Relations Continue, Can the Growth Potential of AI Be Reignited?
Performance of Global Equity Indices(in US Dollar)
Source: Bloomberg, Tiger Brokers
U.S. Inflation Cools Surprisingly, Market Worries Ease Slightly, but Trading Opportunities Remain.
Last week, the December U.S. inflation data was released, showing a slight cooling compared to the previously robust economic data. Specifically, the nominal CPI rose 2.9% year-on-year, higher than the prior reading but within expectations. The main driver of this increase was energy prices, influenced by short-term volatility and lacking long-term persistence.
Source: Bloomberg, Tiger Brokers
Meanwhile, core CPI rose 3.2% year-on-year, exceeding the prior reading but slightly below expectations. Within core CPI, core goods continued to cool, while core services remained relatively resilient, especially the housing component. However, several Federal Reserve officials had previously expressed confidence in this area, noting that it would simply take time to adjust.
As a result, market sentiment has slightly eased. While the market still expects only one rate cut in 2025, the timing has been moved up to June. Interestingly, Federal Reserve Governor Christopher Waller recently stated in an interview, “If inflation performs well, there could be 3 to 4 rate cuts this year.” Therefore, we maintain our consistent view: the market is overly worried about inflation, and rate expectations are too high. This presents certain trading opportunities.
Source: Bloomberg, Tiger Brokers
Continuous Positive Developments in U.S.-China Relations: Is a Turning Point for Greater China Assets?
Recently, there have been frequent positive developments in U.S.-China relations. A few days ago, China’s state media People's Daily published an article titled Fully Understanding the Mutual Benefits and Win-Win Nature of U.S.-China Relations, signaling goodwill toward the U.S. On January 17, China’s Ministry of Foreign Affairs announced that Vice President Han Zheng would attend Donald Trump’s inauguration ceremony in the U.S.; on the same day, the top leaders of China and the U.S. had a phone call.
Traditionally, China has only sent its ambassador to a country to attend the U.S. presidential inauguration. This high-level participation not only demonstrates goodwill from China but also helps to ease the strained tensions between the two nations. Previously, the market had been broadly concerned about Trump’s unexpectedly aggressive pressure on China. However, according to Bloomberg, Trump is reportedly considering a gradual and slow increase in tariffs. We believe that the competitive framework of U.S.-China relations is unlikely to change in the short term. However, there may be room for moderation in Trump’s China policy. Thus, we maintain a relatively optimistic outlook for Greater China assets in 2025.
Source: Bloomberg, Tiger Brokers
TSMC's Financial Report and Guidance Exceed Expectations: Can AI's Growth Potential Be Reignited?
Recently, TSMC’s latest financial report delivered a pleasant surprise, with both revenue and profit significantly surpassing market expectations. The company reported total revenue of $26.9 billion this quarter, with a gross profit of $15.9 billion, and its gross margin climbed for the fourth consecutive quarter, reaching 59%. Moreover, the official guidance given for the next quarter was equally surprising, with the lower end of guidance for both revenue and gross margins beating previous market expectations.
Source: TSMC, Bloomberg, Tiger Brokers
At the same time, the HPC segment, driven primarily by AI, remained strong. Despite a high base, its contribution to revenue remained stable at over 50%. During the earnings call, management projected that AI-related revenue would maintain a 45% compound annual growth rate over the next five years. Rough estimates suggest that by 2029, the company's AI-related revenue will exceed $80 billion. Additionally, TSMC, known for its traditionally conservative approach, has increased its capital expenditure budget by 20%-30%, signaling its confidence in future growth. With this, the growth potential of AI has once again been reignited!
Source: Bloomberg, Tiger Brokers
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