BofA Asia Fund Manager Survey: AI confidence warms up, inflation concerns rise, memory becomes top AI investment pick

Title context: BofA Asia Fund Manager Survey: AI confidence warms up, inflation concerns rise, memory becomes top AI investment pick Text: Bank of America's latest October Asia Fund Manager Survey shows that investors' confidence in the AI theme strengthened significantly in October, while concerns about AI overvaluation eased somewhat; at the same time, inflation concerns rose markedly, and a Bank of Japan rate hike in December became the mainstream expectation. AI confidence strengthened significantly, with memory becoming the best risk-reward choice in AI The survey shows that 70% of investors believe AI monetization will be the biggest driver of Asia-Pacific stock market performance over the next 12 months. At the same time, only 35% of investors believe the positive impact of AI has been fully or overly priced in, down sharply from 55% in September, indicating that market concerns about AI overvaluation have eased somewhat. Positioning has also become more aggressive, with 45% of investors still overweight AI or rotating within AI, up from 25% in September. In the selection for the "best risk-reward opportunity in the AI value chain over the next 12 months," memory ranked first with 30% of votes, up sharply from 20% in September; connectivity/networking ranked second, followed by power and energy and data center infrastructure. The share of votes for software and platforms plunged to 5% from 25% in September. Inflation concerns rise, BOJ December rate hike expectation becomes mainstream At the macro level, growth expectations remain stable, and the economic outlook for Asia-Pacific excluding Japan remains stronger than the global outlook. However, inflation concerns rose significantly: a net 50% of investors expect higher inflation over the next 12 months, far above 25% in September. On BOJ policy, 60% of investors expect the next rate hike to come in December. This is in line with the expectations of Bank of America's Japan economists. On Japanese equity market themes, earnings have replaced BOJ policy normalization as the most critical theme in the near to medium term. The ratio of upward to downward revisions to Japanese corporate earnings hit a record high in September. Technology and AI remain favored, Asian funds shift toward healthcare, materials, industrials At the same time, expectations for a semiconductor cycle recovery strengthened somewhat, with 50% of investors expecting export growth in South Korea/Taiwan, China to drive a stronger semiconductor cycle. In terms of positioning and allocation, Taiwan, China and Japan remain investors' most favored markets, reflecting investors' continued optimism about investment opportunities in technology and AI-related sectors. For Asian markets outside Japan, investors further shifted allocations this month toward healthcare, materials, and industrials, while reducing allocations to insurance and consumer sectors. In the Japanese market, positioning remains highly concentrated in banks and semiconductors.