What happened
Wang Guanqiao, manager of the Boshi Yuyi Flexible Allocation Fund, argues that the AI sector may enter a phase of heightened volatility, as market expectations for 2027 US AI capital expenditure could reach $1.2 trillion, and any shortfall in AI revenue generation could pressure valuations.
He has reduced tech stock positions in his portfolio, shifting toward undervalued value stocks in traditional industries like construction machinery, cement, and compound fertilizers, which he sees as 'underestimated good businesses' with limited downside and potential for cyclical recovery.
Wang emphasizes a disciplined investment approach: prioritizing win rates over赔率 (odds), maintaining a 30% safety margin on downside, and targeting a three-year doubling in upside for selected stocks.
Why it matters
Wang's strategy highlights a growing divergence in markets: while tech stocks experience high turnover and volatility, cash-flow-generating assets with low valuations and dividend yields of 4-5% may be underpriced, especially as ten-year government bond yields hover around 1.7%.
His contrarian moves—cutting equity exposure in early 2024 and reducing tech holdings in Q2 2026—underscore the importance of risk management and avoiding permanent capital loss in uncertain times.
The focus on 'Chinese manufacturing going global' and cash-flow-rich sectors suggests that non-AI opportunities may offer unique alpha, distinct from the global tech beta.
Key facts
Wang has managed the Boshi Yuyi fund for three years, maintaining a stock selection win rate of 55-60%.
His portfolio typically holds 15-20 stocks, with an average price-to-earnings ratio of 15-20 times.
He reduced equity positions from 80% to 40% in H1 2024, then added convertible bonds and undervalued stocks in August 2024.
In Q2 2026, he cut tech stock positions to half their previous level while keeping overall equity exposure above 80%.
He favors dividend yields of 4-5% in sectors like insurance, building materials, chemicals, and nonferrous metals.
What to watch next
Monitor whether AI capital expenditure growth meets revenue expectations; any disappointment could trigger valuation contractions in the sector.
Watch for continued flows into cash-flow-generating assets as fixed-income yields remain low, potentially lifting valuation centers of high-dividend stocks.
Observe if 'Chinese manufacturing going global' becomes a sustained theme, offering opportunities in consumer goods, capital goods, and new energy.