Fundamental Signals

Editor’s Notes

• Japan is back in the driver’s seat, but this is no longer a passive trade. The so-called Takaichi Trade is powering the Nikkei through exporters, defense, and AI-linked industrials, helped by yen weakness and fiscal expectations. That said, with daily moves stretching and policy optimism well priced, I’d be more selective here, focusing on balance-sheet mispricings and strategic chokepoints rather than chasing index momentum.

• Hong Kong feels heavy, but not indiscriminate. Sentiment is clearly risk-off ahead of Chinese data, and the tape reflects that in banks, energy, and semis. Still, pockets like consumer tech and healthcare are holding up, which tells me this is more about macro anxiety than wholesale capitulation.

• AI is colliding with the real world—power, materials, and capacity. The bottlenecks are no longer theoretical. HBM is sold out, advanced packaging is tight, and electricity demand is becoming the constraint. This is why uranium, specialty materials, and obscure suppliers like ABF films or NAND producers keep surfacing in the winners’ list. Owning the constraint has historically been the higher-conviction trade.

• Geopolitics and resource control are creeping back into valuation frameworks. From Greenland to rare earths to speculative but telling discussions around supply leverage, the market is slowly relearning that access matters as much as innovation. In that environment, I’m cautious on “vibe-based” dip buying and more comfortable with assets that control something hard to replace.

• A good reminder that stock-picking still matters: Nidec. We highlighted Nidec earlier as a beneficiary of EV motors and precision components tied to electrification and automation. The stock popped over 10% yesterday, validating the view that even in an overheated tape, companies with clear exposure to durable, structural demand can still deliver outsized moves.

I. Overall Themes, Market Sentiment & Debates

Japan: The 'Takaichi Trade' Fuels Nikkei's Resurgence Amidst Overheating Concerns

The Nikkei 225 continues its robust rally, recently hitting new highs and seeing 3%+ daily moves (e.g., 53,700–54,400) driven by the anticipated 'Takaichi Trade'. This narrative is built on expectations of aggressive fiscal stimulus, snap elections solidifying a pro-growth agenda, and sustained Yen weakness, which disproportionately benefits Japanese exporters. The market's enthusiasm is evident in defense and aerospace plays like Mitsubishi Heavy Industries (7011) and IHI (7013), which are seen as core beneficiaries of potential increased defense budgets and AI/space synergies. Furthermore, Japanese semiconductor and AI-related stocks are demonstrating relative strength, achieving all-time highs, as Japan increasingly positions itself as a critical supply risk hedge in the global semiconductor equipment and materials sector. However, the rally isn't without its detractors, with warnings of fading momentum stemming from inflation, debt risks, and potential overspending. For idiosyncratic alpha, a strategy focused on severely mispriced assets (below book value or net cash) is gaining traction, minimizing reliance on volatile earnings forecasts and targeting a recovery to the 1x P/B baseline.

Hong Kong: Bearish Drift Ahead of Key Chinese Data

Market sentiment in Hong Kong is distinctly bearish, with the Hang Seng Index (HSI) declining approximately 1% to ~26,563 amidst broad selling pressure. A pervasive caution is prevalent ahead of impending Chinese economic data releases, with some analysts warning of a 30%+ correction probability for the broader market. Sectoral performance reflects this anxiety: banking (e.g., Merchants Bank down 2.98%), energy (PetroChina down 2.49%), and broader tech (SMIC down 1.38%) faced selling pressure, indicating a risk-off posture tied to China growth concerns. Yet, pockets of resilience emerged, notably in healthcare and select consumer sectors, with Meituan (HK: 3690) showing a rare positive move (+2.41%), highlighting selective strength in consumer tech despite broader sectoral weakness.

Global Macro & Cross-Currents

• Geopolitical Flashpoints & Resource Nationalism: US-EU trade tensions are escalating over Greenland, with US demands for acquisition from Denmark underscoring the broader theme of resource nationalism. China's long-term control over strategic mineral inputs from regions like Africa places the West at a significant disadvantage, highlighting critical supply chain vulnerabilities. The Kiel Institute's study, indicating US citizens bear 96% of US tariff costs, adds further nuance to trade war economics. A highly speculative 'black swan' scenario posits a US move to place Novo Nordisk (NVO) on an Entity List as geopolitical leverage against Denmark, potentially triggering EU retaliation through ASML (semiconductor monopoly) against US chip fabs, with a cascading risk to the 'AI bubble'.

• AI's Insatiable Demand & Infrastructure Bottlenecks: The AI sector continues to drive significant bullish sentiment in specific stocks (semiconductors, cloud, software), but simultaneously fuels concerns about high valuations and a potential 'AI bubble'. Crucially, the AI boom is projected to dramatically increase electricity demand, intensifying interest in Small Modular Reactors (SMRs) and domestic uranium supply as key 'carbon-free energy' solutions. The critical roles of companies like ASML, Applied Materials (AMAT), Lam Research (LRCX), Amphenol (APH), and Fabrinet (FN) in the semiconductor supply chain are underscored, with Micron having already sold out its 2026 High Bandwidth Memory (HBM) supply, signaling extreme demand. This also supports the high-conviction thesis around uranium and rare earth equities, which are expected to violently reprice due to physical bottlenecks, geopolitical factors, and energy security needs, favoring 'chokepoint owners' in processing and mining.

• Market Philosophy Debate: A notable divergence is observed in investment philosophy, with a public debate within the value investing community questioning a shift from fundamental analysis to speculative 'vibe-based investing'. Concurrently, a strong warning is issued against blindly 'buying the dip', arguing that recent successes might be a function of a prolonged bull market and small sample size, rather than a universally effective strategy, especially given the historical duration of bear market recoveries.

II. Notable Stock Moves & Developments (Jan 19, 2026)

III. Interesting Comments, Facts & Ideas

Micron Technology (MU): A Deeper Dive into HBM Tailwinds

The bullish case for Micron is strengthened by robust earnings, a significant insider director purchase of ~$7.83 million, and strategic moves including plans to acquire a Taiwanese fab. Critically, Micron has already sold out its entire High Bandwidth Memory (HBM) supply through 2026, underscoring the overwhelming demand from the AI sector. The stock currently trades at 9.6x forward earnings, a substantial discount to the sector average of 25x, suggesting potential for re-rating as HBM ramps.

Amazon (AMZN) & Sovereign Cloud Expansion

Amazon is bolstering its long-term market position with the launch of AWS European Sovereign Cloud, backed by a €7.8 billion investment. This initiative, designed to be physically and logically independent and operated exclusively by EU citizens, is a strategic move to unlock significant revenue streams by addressing stringent data sovereignty requirements across the European Union.

Homebuilders on the Cusp: Steve Eisman on D.R. Horton

Reputable investor Steve Eisman has identified D.R. Horton as a key homebuilder stock poised for a rally. The positive outlook is largely attributed to the macro tailwind of falling mortgage rates, expected to stimulate housing demand.

The Quantum Race Heats Up: IBM and Alphabet

IBM is making significant strides in quantum computing, focusing on its Qiskit software platform and developing Nighthawk chips (aimed at achieving quantum advantage) and Loon chips (enabling the first fault-tolerant quantum computer). Alphabet (GOOG) has also achieved verifiable quantum advantage with an algorithm running 13,000 times faster than a traditional supercomputer, solidifying its position as a long-term AI leader. These developments signal accelerated progress toward commercial quantum applications.

Tesla's Dojo & AI Chip Revitalization

Tesla has revived its Dojo3 supercomputer project, which will be powered by the newly designed AI5 chip. This indicates a renewed focus on in-house AI infrastructure crucial for its autonomous driving ambitions.

Software Valuations: Adobe (ADBE) & Workday (WDAY) as 'Falling Knives'?

Cautiously bullish sentiment surrounds Adobe and Workday, as these software stocks have been 'crushed' by AI fears. However, their valuations are now at multi-year lows, offering an attractive entry point given their wide moats and strong margins. This presents a potential 'falling knife' scenario that may turn into a buying opportunity for long-term holders.

Metals on Edge: Iran Unrest & Silver Plays

Unrest in Iran has provided a boost to precious metals. Investors are evaluating selling profitable silver ETF (SLV) positions and considering a rotation into silver mining stocks as an alternative for leveraged exposure to price movements.

AI Supply Chain Insights

The burgeoning demand for AI infrastructure is driving specific component plays. Ajinomoto (2802.T) benefits from strong demand for its Build-up Film (ABF) used in AI servers and has strategic AI investments in protein processing. KIOXIA (285A.T) is capitalizing on an unprecedented NAND flash shortage, fueled directly by AI infrastructure and data center needs. Disco Corporation (6146.T) is a beneficiary of TSMC's increased investments in advanced packaging, addressing the AI-driven memory demand bottleneck. These companies highlight the broad and deep impact of AI on specialized manufacturing and materials.

Energy Transition & Corporate Action

Weichai Power (2338.HK) is signaling a strategic shift with governance reforms, strong growth in its new energy business, and a recent share buyback program, suggesting management confidence and a focus on long-term value. In the traditional materials space, Laopu Gold (6181.HK) indicates a broader trend in the gold jewelry industry, shifting towards brand-driven strategies and a consumer preference for smaller, more frequent purchases.

Disclaimer: This content is generated using AI, synthesizing public data (filings, reports, news) and social media (Reddit, X). It may contain errors, inaccuracies, or hallucinations. Nothing herein constitutes financial advice. This newsletter is for informational purposes only; please consult a qualified professional and conduct your own due diligence before making any investment decisions.