China's Zhipu Jolts AI Race as 'Scare Trade' Grips US | The China Show 2/12/2026
Speakers
Summary
- The "AI Scare Trade" Divergence: While US markets are selling off software, biotech, and services due to fears of AI displacement (the "Scare Trade"), Asian markets are rallying on the "picks and shovels" thesis. The narrative is shifting from AI software to AI infrastructure, specifically memory chips, which are identified as the critical bottleneck for AI agents.
- Nickel Supply Shock: Indonesia, controlling 2/3 of global nickel supply, is slashing production quotas from 42M tons to 12M tons to force prices higher. This is a massive supply-side intervention intended to floor the market.
- Consumer Weakness in Alcohol: A broad "sobriety" or cost-cutting trend is hitting global brewers (Heineken, Asahi, Budweiser APAC), with volumes dropping significantly (e.g., Asahi Japan sales down 11% in Jan).
- Crypto Institutional Floor: Despite retail volatility and "flash crash" events, institutional accumulation of Bitcoin remains robust, with 1.3M BTC held by institutions and continued inflows, suggesting a divergence between retail panic and institutional accumulation.
Trade Ideas
Lincoln Investment (Quant fund) returned 70% last year. The manager states small caps offer "maximized return" due to higher volatility and inefficiency compared to large caps. In the Chinese market, large caps are "defensive/beta," but alpha generation is concentrated in small caps where information asymmetry exists. Quants are aggressively exploiting this. LONG Chinese Small Caps (via Quant strategies or ETFs). Regulatory crackdowns on quant trading or small-cap liquidity drying up.
Despite retail volatility and liquidation events, institutions added 43,000 BTC to portfolios in January. Total institutional holding is ~1.3M BTC. The "crash" narrative is driven by retail panic and leverage flushes (liquidations), but the "smart money" (institutions) is buying the dip. This divergence usually signals a local bottom. LONG Bitcoin following institutional flows. Regulatory crackdowns or a broader macro liquidity freeze strengthening the USD.
Aliaga states that while the "AI Scare Trade" hurts software, the "nuts and bolts" of AI are still in high demand. She explicitly notes, "Memory is really the bottleneck here, not just the raw intelligence... these agents require memory." As AI shifts from simple chatbots to "Agentic AI" (complex tasks), the computational load on memory chips increases exponentially. Pricing power for memory manufacturers (Samsung, SK Hynix, Micron) is surging because demand outstrips supply, and they have "real moats." LONG Memory manufacturers as the primary beneficiaries of the next phase of AI capex. Hyperscalers (Microsoft, Google, Meta) cutting capex spending due to lack of immediate ROI.
Indonesia is cutting its nickel production quota for the year from ~42 million tons down to 12 million tons. Indonesia accounts for two-thirds of global production. This is a massive, state-directed supply shock designed to squeeze the market. A ~70% reduction in approved quota from the dominant global supplier mathematically forces prices higher to clear demand. LONG Nickel futures or miners with exposure outside of Indonesia (or those with secured quotas). Indonesia reverses policy mid-year or demand for EVs/batteries collapses further.
NetEase Q4 gaming revenue missed estimates (down 4%). Net income declined nearly 30%. The company is missing on fundamental metrics despite "AI integration" narratives. The core business (gaming revenue) is shrinking, and the "AI Scare Trade" is negatively impacting sentiment around Chinese tech/gaming names. SHORT NetEase on fundamental deterioration. A hit new game release revitalizes revenue or aggressive share buybacks.
Budweiser APAC earnings missed; Asahi reported Japan sales down 11% in Jan; Heineken announced job cuts (7% of workforce) due to slumping demand. Multiple major global brewers are reporting the same data point simultaneously: consumers are drinking less alcohol. This signals a structural shift (health/sobriety) or a cyclical crunch (inflation), leading to revenue contraction across the sector. SHORT/AVOID the Alcohol/Brewing sector. A sudden rebound in consumer discretionary spending or successful price hikes offsetting volume declines.
SoftBank is expected to book ~$6.5B in valuation gains from its OpenAI stake. The stock is trading as a proxy for OpenAI sentiment. With OpenAI expected to raise funding at a $100B+ valuation, SoftBank's asset value reprices higher. SoftBank is effectively the only public, liquid way to get exposure to OpenAI's valuation markup (outside of MSFT). LONG SoftBank as an OpenAI valuation proxy. OpenAI valuation collapses or SoftBank is forced to sell assets to fund further investments.
Tekedra Mawakana
CEO, Waymo
Waymo (Alphabet sub-unit) just raised capital at a $26B valuation and is launching in London and Tokyo. Regulatory hurdles are clearing, and the business is moving from "R&D project" to "Commercial Expansion." This validates Alphabet's "Other Bets" valuation and provides a growth engine beyond Search. LONG Alphabet on Waymo execution. Regulatory bans on robotaxis or a high-profile safety incident.
Up Next
This Bloomberg Markets video, published February 12, 2026, features St. John, Richard Teng, Stephanie Aliaga, Andrew Janes, Min Min Low, David Ingles, Kirk Boodry, Tekedra Mawakana discussing FXI, BTC, MU, EWY, SOXX, NICKEL, XME, NTES, BUD, ASBRF, HEINY, SFTBY, GOOGL. 8 trade ideas extracted by AI with direction and confidence scoring.
Speakers: St. John, Richard Teng, Stephanie Aliaga, Andrew Janes, Min Min Low, David Ingles, Kirk Boodry, Tekedra Mawakana · Tickers: FXI, BTC, MU, EWY, SOXX, NICKEL, XME, NTES, BUD, ASBRF, HEINY, SFTBY, GOOGL