Jun 21, 2021
Notes on HSTECH index
ATEC notes that the HSTECH Index (which is dominated by the likes of Alibaba, Meituan and Tencent) has made no progress since peaking in mid-February 2021.
The concerns around Beijing’s anti-trust investigations are well discussed, as were the measures and punitive actions taken. ATEC also notes that the chatter around government regulations have suddenly gone rather quiet.
Yet what remains, as per ATEC’s view, is that China continues its steadfast march towards becoming more digital. Other than the recent stellar results already printed from the likes of Meituan, Canalys recently reported that Cloud infrastructure spending in China expanded some 55% year over year in 1Q21, driven by concerted efforts from both private and public enterprises. ATEC does not think it will let up anytime soon.
Indeed, the following extract from the report says it all. “Digital services, including everything from digital payments and content to customer and social engagement and remote learning, are key drivers behind the demand for cloud infrastructure services in China,” said Canalys Analyst Blake Murray. One year on from the start of the COVID-19 pandemic, cloud service providers in the country have enabled the acceleration of the government’s and other organizations’ digital agendas, while compressing multiple years of transformation plans into much shorter timeframes. They were able to build critical relationships with customers early in the pandemic to support rapid digital transformation. Now they are investing heavily to increase their capacity, develop cloud-based databases, storage and compute capabilities to replace on-premises IT infrastructure, enable a broad developer ecosystem for cloud-native development, and extend cloud and AI to all industries.”
With this backdrop in mind, ATEC does not think we have seen the best for several of these titans. We will be looking for signs of life here.
