Fund Manager Up 97% Calls AI a 10-Year Cycle, Backs Optical Tech

Top Fund Manager Achieves 96.51% Return on Tech Bets

On December 23, Chen Ping, the manager of the HSBC Jintrust Technology Pioneer Stock fund, laid out a detailed investment thesis for the technology sector. His credibility is bolstered by his fund's standout performance, which has delivered a 96.51% return year-to-date, placing it 14th among 969 peers. Despite recent market volatility, the fund maintained its edge with a 10.86% return over the last three months, ranking 55th out of 1040 similar products. Chen, who has over a decade of experience in technology investing, stated that Technology, Media, and Telecom (TMT) stocks still represent a buying opportunity.

AI Cycle Projected to Last at Least 10 Years

Chen forcefully rejected the notion of an AI bubble, arguing that the current phase of high capital expenditure preceding significant revenue is a normal pattern for nascent industries. He projects that the AI revolution is a long-term structural trend, not a short-lived cycle, drawing parallels to transformative technological shifts of the past.

We tend to believe that AI will be a relatively long cycle, at least at the level of the smartphone (ten years), and possibly even at the level of the Fourth Industrial Revolution (decades).

This long-term perspective underpins his strategy of maintaining a high allocation to growth sectors. Chen argues that as AI models improve and find real-world applications, a positive feedback loop of revenue generation is beginning, with global AI capital expenditures potentially growing at a nearly 50% compound annual rate over the next five years.

Optical Modules Favored as Valuations Remain Below 20x PE

Within the AI hardware space, Chen is most optimistic about optical communications and optical modules. He explains that while GPU performance improves according to Moore's Law, the physical components connecting them—like optical modules and power supplies—do not see costs fall as rapidly. Consequently, their share of total data center spending is set to increase, driving faster growth for suppliers in this segment. The demand for optical interconnects is consistently being revised upwards as AI workloads scale both out (across servers) and up (within servers).

Despite the strong performance of AI-related stocks, Chen views the valuations of core holdings as attractive. He noted that key AI companies are trading at a forward price-to-earnings ratio of less than 20 times for the upcoming year, which he does not consider an irrational "hugging" of popular stocks. He also remains constructive on other growth areas, including semiconductors, innovative medicine, and commercial aerospace.