Jefferies: China leads AI race

Jefferies published a report asserting that China is emerging as the strongest long-term contender in the artificial intelligence race, particularly in mass consumer applications, despite volatility in global semiconductor stocks. The report notes that recent sharp declines in chip stocks have brought many near their 200-day moving averages, raising questions about whether the correction is a technical unwinding or a signal of slowing capital expenditure by hyperscalers. Jefferies highlighted divergent investor reactions to earnings: Alphabet reported negative free cash flow for the first time since its 2004 IPO, Meta's free cash flow plunged 91% year-over-year and its shares fell 10% after hours, while Microsoft gained 8% after maintaining its capex guidance. The report suggests that AI demand for compute will continue growing, but the industry may resemble airlines rather than a winner-takes-all model.