China emerging as long-term AI winner despite semiconductor market volatility: Jefferies

Jefferies says China is emerging as the strongest long-term contender in the AI race even as global semiconductor stocks swing. The note points to sharp declines in chip shares that have moved many companies close to their 200-day moving averages, raising two concerns: leveraged-position unwinds and early signs that hyperscalers could be slowing capex. Despite the volatility, Jefferies maintains China is well positioned, especially for consumer-facing AI applications. It also argues that quarterly earnings have not yet shown a broad slowdown in AI spending, so analysts have not cut earnings forecasts for memory-chip companies. Still, markets are reacting negatively to rising capex. Jefferies cites Alphabet’s first negative free cash flow since 2004 and Meta’s after-hours drop alongside a capex increase to $130–145 billion, while Microsoft gained after keeping about $175 billion capex guidance for 2026.