Western Securities: Overseas AI may slow down, domestic capital expenditure takes over, bullish on Hong Kong internet stocks

Western Securities kept an overweight call on Hong Kong internet stocks after Democrats' midterm sweep, arguing that expected delays to US AI data-center (AIDC) buildouts and easing US-Iran tensions will weaken the dollar and shift global AI capex leadership toward China. The broker said US cloud capex is set to exceed operating cash flow in 2026 and worsen in 2027, while Chinese cloud capex should improve by 2027, with Alibaba's weighted average RMB borrowing rates at just 1.5% short-term and 2.5% long-term as of March 2026 versus Oracle's new bonds at 7%-8.65% and CoreWeave's at 8.5%-9.75%. It flagged December 11 temporary funding expiry and a debt-ceiling fight around Q1 2027 as windows for further dollar weakness, and said Democratic scrutiny of data centers reflects a tax fight—US corporate pre-tax profits are at a record share of GDP while federal corporate income tax revenue has fallen to about $380 billion, below CBO projections, partly due to one-time expensing for data-center investment. Watch the December 10, 2026 ERCOT report, state legislative action after January 12, 2027, and the new governor's measures after January 19. On the domestic side, the broker noted broad-based ETFs drew net inflows for 25 straight sessions from September 28 to November 6, totaling over 414.9 billion yuan across CSI 300 and dual-innovation products, and pitched Hong Kong internet, mainland property and consumer, and gold and metals as its three allocation lines.