Has the AI Rally Gone Too Far, Too Fast?

• The AI trade is shifting from momentum-driven excitement to a focus on monetization and ROI, requiring more selective stock picking.
• AI trade being overcrowded is a key risk, especially in the memory cycle where supply is expected to catch up with demand, potentially impacting pricing.
• Investment opportunities are broadening beyond memory to components like MLCC makers and ODMs (e.g., Hon Hai/Foxconn) in Asia.
• Asia, particularly Korea and Taiwan, are major beneficiaries of the AI trade, but future returns will be more earnings-driven.
• China is viewed as a stock-picker's market, not a broad beta trade, with potential in robotics and efficient manufacturing despite trade tensions.
• India's manufacturing ambitions face challenges in labor, red tape, and logistics, but government efforts are underway for improvement.
• Japanese Yen weakness is seen as a positioning issue and foreign capital outflow, rather than solely economic fundamentals.

Fiona Yang of Invesco believes the AI trade is not over but is transitioning from excitement to a focus on monetization and return on investment (ROI). She advises investors to be more selective, looking beyond just memory to broader components and original design manufacturers (ODMs) in Asia. Key risks include the AI trade becoming overcrowded and potential demand volatility as capacity expands.