Asia investors demand AI revenue proof as focus shifts from exposure to earnings: BofA

Investors in Asia are now seeking concrete proof that artificial intelligence (AI) translates into revenue and earnings, rather than just looking for exposure to the technology, as the sector progresses into a more established phase, according to Chris Oberoi, head of Asia-Pacific research at Bank of America (BofA) Global Research.

Oberoi stated that AI can indeed boost productivity and generate revenue. Meanwhile, President Xi Jinping and US President Donald Trump are set to meet in Washington on Thursday, with trade and technology likely to be key topics of discussion between the world's two largest economies. Oberoi noted that conversations with clients about AI have become more complex in recent months, shifting from a focus on simple exposure to AI to evaluating models, semiconductors, memory, and revenue generation.

This shift is evident in BofA's September Asia Fund Manager Survey, which found that 80% of 190 respondents believe that proven AI monetisation would most increase their confidence in investing in AI-related stocks. Of those surveyed, 55% said that the positive impact of AI on equity valuations is already fairly or more than fully reflected, up from 37% in August.

BofA still anticipates the AI capital expenditure (capex) cycle to continue, with Taiwan and Japan identified as top Asia-Pacific markets for AI investment. Taiwan is favored for its advanced chips, packaging, and servers, while South Korea benefits from memory demand and Japan is poised for growth in industrial automation and robotics.

China plays a crucial role in the global AI supply chain and infrastructure expansion, but faces intense competition for monetisation in robotics and industrial applications. BofA expects some progress in trade during the upcoming presidential summit, with possible tariff reductions in sectors like agriculture and aerospace, and an extension of the existing trade truce.

However, the meeting is unlikely to significantly alter the ongoing technology rivalry between the two countries. The US Federal Reserve recently raised interest rates by 0.25%, the first increase in over three years, and BofA predicts two more rate hikes before year-end. The Bank of Japan also raised its policy rate to 1.25%, the highest level in 31 years, as it transitions away from ultra-loose monetary policy and expects the yen to strengthen to 149 per US dollar by the end of 2026.