HK Stock Market Move | ZTE Corporation (00763) falls more than 4% again. Fubon Securities believes market has overly high expectations for the company's AI capabilities. Peak in capital expenditure by operators is dragging down the company's profit prospects.

ZTE Corporation (00763) fell over 4% again, dropping 3.84% to HK$21.3 as of press time, with a trading volume of HK$135 million. Furui published a report pointing out that although ZTE Corporation's stock price has retraced 50% from its peak since December 13 last year, market expectations for the company's artificial intelligence (AI) may still be too high. ZTE's subsidiary, ZTE Microelectronics, has no experience in designing AI chips and most of its revenue comes from internal operations. Therefore, the bank believes that the markets expectation of ZTE benefiting from the growth of AI specific application integrated circuits (ASIC) is unrealistic. The bank believes that due to hardware limitations, AI smartphones have not yet become popular, so even if ByteDance allows ZTE to install AI on its smartphones, the situation will continue. In addition, the bank believes that ZTE's valuation is not expensive, but since the company generates over 60% of its revenue from telecommunications equipment and capital expenditure by telecom operators has peaked, ZTE's profit outlook remains weak.