Category: 3. Business

Tidying my drawers this week, I found some research notes I wrote in the late 1990s. It was my last job in stockbroking — I was an internet stock analyst at a time when technology, media and telecoms (TMT) shares were shooting skywards. 

By 2000, commentators were screaming “bubble”. That April my firm, Dresdner Kleinwort, alongside Goldman Sachs, led the IPO of Deutsche Telekom internet subsidiary T-Online. The market was jittery. Remarkably, the T-Online IPO got away successfully — its shares rising more than 40 per cent at the end of the first day. It was probably the last to do so. The “tech wreck” was already under way.

As talk of bubbles in artificial intelligence (AI) stocks grows, there are some lessons to apply from those years. Chief among these is not to throw the baby out with the bathwater. 

The long-term investment thesis underpinning my old research notes and driving share prices was roughly correct. Internet access went from being a tool for the scientific community to a global phenomenon that would transform all our lives. However, the forecast profits took much longer to arrive than expected. 

AI has similar potential — and, maybe, risks. It’s not surprising that investors are getting excited — perhaps, in some instances, overexcited. But calling the top may not be necessary.

While it pays to be cautious, listening to perpetual bears will make you poor as well as depressed. The last week has seen a modest sell-off in the tech-dominated Nasdaq index, led by Palantir. But a stock operating in opaque businesses and whose share has risen 150 per cent this year is an easy target. The Nasdaq fell by nearly 20 per cent in the late summer of 1998, shaking out those investors getting the heebie-jeebies. However, it then rose over threefold in the next 18 months. 

A feature of the TMT bubble was that this was a winner-takes-all game. Many of today’s “hyperscalers” — including Microsoft, Amazon, Oracle, Meta and Google — were winners of that battle. They are spending billions today as if it is the same war. It might not be. 

Those investing most may find they are not carving the defensive moats they hope for. I was struck that Airbnb, a poster child of a data-based business, chose China’s Alibaba rather than OpenAI to apply AI to its customer service. 

To invest in any of the hyperscalers you need to assess whether the revenues they generate over the long term for their computing capacity will justify what it costs to build. We can only guess how much consumers, businesses and governments will be prepared to pay for the productivity improvements promised. Last week’s financial releases showed that investors are more confident in Amazon and Alphabet (Google) than Oracle and Meta — indeed, corporate debt investors are now asking for higher yields on further bond issuance by these companies.

If a bubble is building then we have to think about not just when it will burst, but how. The crash of 2008 saw nearly everything pop — banks most explosively. The tech crash was a slow-motion affair in comparison, with many fewer victims. The Nasdaq bubble “burst” in March 2000, but investors had a good six months to take their profits before the bear market really took hold. 

Back then, the best thing to do was to sell everything anywhere near the TMT bubble as babies got slung when the bubble burst (though most TMT stocks were on ridiculous valuations by then). Fortunately, there were many modestly priced shares beyond TMT that were still worth buying. The best were mining companies — some trading at a fraction of the cost of opening their mines. 

Concerns about “the bubble” are principally concerns about global equity indices. The Magnificent Seven technology stocks make up over 20 per cent of these indices. Outside the Seven, non-US technology businesses — such as Alibaba, TSMC and several other semiconductor companies — are also exposed to the same theme, as are the companies supplying power to the data centres. 

 So how do you negotiate the path between trying to time the bubble and getting caught by everything AI-related being abandoned when it pops? 

Be led by valuations. Take Microsoft, for instance. Its shares look merely stretched, not ridiculous. The big difference between today and 2000 is that these companies have cash flow. Back then most did not. The question that matters most is this: are they using that cash flow and profits wisely? It was concerns about Meta’s heavy capital expenditure that took the shares down last week, while Amazon rose on its strong cloud cash flows, despite spending a similar amount on AI. 

If individual stocks become too aggressively valued and their investment case hyper-optimistic, sell them. Gradually, your exposure to tech will drop.

We do not own Tesla or Nvidia and have just pulled the plug on Meta. Consequently, we have about 9 per cent in Magnificent Seven stocks, not 20 per cent. We may have retreated too soon, but if you chose to do likewise, you may have found you’ve banked some decent profits. 

And the good news today is that, as in 2000, there are plenty of stocks in out-of-favour sectors — such as healthcare or consumer staples — which look like attractive new homes for the money. We have just bought a holding in Nestlé, which is about as far from the excitement of AI as you can get. Its coffee, chocolate and pet litter businesses are not to be sniffed at, but a yield of nearly 4 per cent in Swiss francs looks pretty sweet.

Long term, the benefits of AI should be improved productivity in a range of sectors. In the loathed oil sector, Schlumberger has just launched an AI system for improving efficiency in hydrocarbon production, including reducing leaks of methane. This stock is on 14 times earnings and a 3 per cent yield — valuations more often seen in UK equities than American.

In short, the lesson I carried over into fund management from 2000 was that if the valuations of the shares you are buying seem reasonable then you need not worry too much about the stretched valuations of the shares others own.

Simon Edelsten is a fund manager at Goshawk Asset Management. Goshawk funds own Microsoft, Amazon, Alibaba, Taiwan Semiconductor Manufacturing Co, Nestlé and Schlumberger

It was supposed to be a triumph: Shein’s emergence from the shadows of online retail into a permanent physical boutique in one of the world’s most recognisable department stores in Paris, the global capital of fashion.

Instead, the China-founded fast fashion giant is this week dealing with French street protests, a government-led effort to ban it from operating in the country and allegations that third-party sellers on its site have been touting machetes, knuckle dusters and sex dolls that looked like children.

For Shein, the outcry in France is just the latest in a series of controversies that have plagued its years-long, multi-jurisdiction campaign to become a public company. For publicity shy founder Xu Yangtian, they will serve as a reminder that high-profile campaigns carry their own set of risks.

“He’s extremely low-key and inconspicuous,” says Hu Jianlong, founder of Shenzhen consultancy Brands Factory, adding that even Shein employees would struggle to correctly identify him.

“But if a company reaches such a large scale, with employees all over the world and then they are preparing for an IPO . . . At that point, it’s very difficult to maintain a low profile.”

Xu was born in Zibo, a manufacturing city in eastern China’s Shandong province, according to people who know him.

But while his name occasionally appears in company press releases, Shein’s website carries no picture or biographical information about its founder. He has never given a media interview, is rarely photographed publicly and hasn’t posted on social media for nearly a decade. There has even been confusion about his English name, which he changed from Chris to Sky.

A few details have been reported about his early life. Born in 1983, he got his first taste of international trade while at Qingdao university in the 2000s, sourcing orders of everything from gaskets to spark plugs. After graduation he moved to Nanjing where he founded an ecommerce business, touting a range of consumer goods directly to customers. Later, he co-founded wedding dress seller Sheinside, a precursor to the fast fashion company of today.

Shein’s low prices and vast choice led to meteoric success in western markets, particularly the US. Algorithms scour the web for trending ideas and feed them to designers, who then place orders with a network of about 7,000 contract suppliers, many clustered in Panyu, a manufacturing suburb of Guangzhou.

The company tests the popularity of new designs via ultra-small orders, only ordering more when it is sure there will be demand. This model allows Shein to offer millions of designs at any one time, according to a person familiar with the company, compared to tens of thousands at other mass market retailers.

“Xu effectively turned supply chain agility into a strategic weapon, disrupting legacy brands like H&M, Zara and Forever 21,” says Brittain Ladd, a US supply chain consultant who previously worked at Amazon and Dell.

But western retailers argue the company unfairly exploits customs tax exemptions granted to small value packages, known as de minimis in the US, allowing it to undercut domestic rivals.

US President Donald Trump’s ending of these exemptions — and similar efforts in the EU and the UK — has driven down Shein’s valuation just as it seeks to list its shares.

The location if its listing has also been in flux. While the company initially hoped to list in New York, allegations from lawmakers that it employs forced labour in its supply chain led it to focus on a London IPO.

A disagreement between Chinese and UK regulators over the language in its risk disclosure prompted a second pivot, this time to Hong Kong, where it has filed for a listing confidentially. Once valued at as much as $100bn, some investors are pushing the group to cut its valuation to around $30bn to speed up the process.

“Shein is at a critical point of figuring out its business model for the next five to 10 years,” says Sheng Lu, a professor at the University of Delaware who studies the fashion industry. “The challenge is the growth, how to keep expanding, how to further satisfy their investors, especially if they need to think about an IPO.”

In 2023, Shein launched a third party market place, in response to competition from nimble rival Temu. This allowed it to diversify into new categories, but sowed the seeds of its troubles in France.

French finance minister Roland Lescure has called the “horrors” for sale on Shein’s marketplace “disgusting”. Ministers said on Thursday that all Shein packages had been blocked for the past 24 hours as customs agents searched through them. The French government has also called for the EU to take action against Shein flouting European laws, including going so far as levying fines equivalent to 6 per cent of global revenues if it does not comply.

Xu now lives in Singapore, where the company moved its headquarters in 2022. Several people describe him as “shy” and introverted. One who has worked with him called him “rough around the edges”.

While some partners would like Xu to take a more public-facing role before the company lists its shares, the latest controversies explain his reticence. The backlash in France may only serve as a reminder of the comforts of near anonymity.

william.langley@ft.com, eleanor.olcott@ft.com, adrienne.klasa@ft.com

Health authorities have issued a nationwide recall of alfalfa sprouts, urging people not to eat affected products, after at least 44 people across Australia contracted an unusual strain of salmonella.

The recall applied to 125g packets of sprouts produced by Parilla Fresh, which included: Aussie Sprouts Alfalfa Sprouts, Hugo’s Alfalfa Onion & Garlic Sprouts, Hugo’s Alfalfa & Radish Sprouts, Hugo’s Alfalfa & Onion Sprouts, Hugo’s Salad Sprouts, Hugo’s Alfalfa & Broccoli Sprouts and Hugo’s Trio Sprouts Selection.

The notice applied to products sold in supermarkets and grocers nationally, with use-by dates up to and including 20 November 2025.

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It followed a joint investigation by interstate health and food regulatory authorities after an increase in a particular salmonella infection.

At least 44 people nationwide had been identified with the “unusual strain of salmonella”, including 18 people in New South Wales, nine in Victoria and 15 in Queensland, health authorities from each state said.

Health authorities said the affected alfalfa sprouts were sold in multiple supermarkets including Coles, Woolworths, IGA and other independent grocers and stores in NSW, Queensland, Victoria, the Northern Territory, Australia Capital Territory and South Australia.

Keira Glasgow, the director of the One Health Branch at NSW Health, said consumers should check their fridge and avoid eating any of the affected products, which could make them ill.

“Anyone who has consumed alfalfa sprouts should be on the lookout for symptoms, which include: headache, fever, stomach cramps, diarrhoea, nausea and vomiting,” she said.

Symptoms usually started 6-72 hours after exposure, and could last for up to a week.

“Most people recover within a week by having lots of rest and drinking plenty of fluids such as water or oral hydration drinks from a pharmacy,” Glasgow said.

“While anyone can get salmonella infection, infants, the elderly and people with poor immune systems are more likely to have severe illness.

“These people may need antibiotics from their doctor or, in more severe cases, hospitalisation.”

An investigation is under way involving authorities across jurisdictions.

The recall notice from Food Standards Australia New Zealand advised: “Consumers should not eat this product. Consumers should return the product(s) to the place of purchase for a full refund. Any consumers concerned about their health should seek medical advice.”

FILE PHOTO: A consortium of around 20 banks is providing a project finance loan of about $18 billion to support the construction of a data center campus linked to Oracle in New Mexico.
| Photo Credit: Reuters

BEIJING – China has moved to promote the integrated development of its coal and new energy sectors to support the green, low-carbon transition of its energy mix.

In a new guideline, the National Energy Administration (NEA) has called on coal-mining regions to accelerate their development of wind and solar energy projects, promote clean energy substitution through the adoption of electric and hydrogen-powered mining trucks, use renewable energy for heating and cooling, and build smart microgrids for the supply and trade of green electricity.

By the end of the 15th Five-Year Plan period (2026-2030), the new energy development model in mining areas will have matured in basic terms, according to the NEA.

ALSO READ: Green projects power up China-ASEAN ties

The move is the latest step in China’s new energy development. By the end of September, China’s total installed renewable energy capacity stood at nearly 2.2 billion kilowatts, accounting for 59.1 percent of the nation’s total power capacity. In the first three quarters of the year, renewables generated about 40 percent of China’s total electricity. 

TOTO (TSE:5332) has just issued an updated full-year earnings forecast, lowering its outlook for the fiscal year ending March 2026. The revision follows interim results that outperformed expectations, supported by solid business in Asia and semiconductor-related demand.

See our latest analysis for TOTO.

TOTO’s announcement comes on the heels of modest year-to-date share price gains, up 3.38%. Even as the one-year total shareholder return remains in negative territory at -8.27%, upbeat interim performance and steady dividends caught some market attention. However, the muted longer-term returns suggest that sentiment is still cautious and momentum has not yet truly turned around.

If this shift in outlook has you thinking about new opportunities, now’s the perfect moment to broaden your radar and discover fast growing stocks with high insider ownership

With the guidance now reset and shares still trading at a modest discount to analyst targets, is TOTO an undervalued opportunity for patient investors, or are markets already accounting for any brighter prospects ahead?

TOTO is trading at a price-to-sales (P/S) ratio of 0.9x, which positions its valuation above the broader Japanese building industry. With the last close at ¥3,859, the market appears to be assigning a richer multiple to TOTO relative to peers.

The price-to-sales ratio assesses how much investors are paying for each unit of revenue. For industrial companies like TOTO, it’s a helpful indicator, especially when net earnings are volatile or impacted by one-off events. Unlike earnings, revenue generally remains less distorted by non-recurring items. This makes the P/S ratio useful for comparing similar firms within this sector.

Despite this higher multiple, TOTO’s valuation is considered good when measured against the average of its listed peers, which share the same 0.9x P/S ratio. However, it stands expensive compared to the broader industry P/S average of 0.5x. Factoring in the estimated fair price-to-sales ratio of 1.6x, there is an argument the market could eventually price the stock higher if revenue and market sentiment improve.

Explore the SWS fair ratio for TOTO

Result: Price-to-Sales of 0.9x (ABOUT RIGHT)

However, sluggish long-term returns and decelerating near-term momentum could challenge the valuation case if revenue growth does not accelerate as anticipated.

Find out about the key risks to this TOTO narrative.

While the price-to-sales ratio points to fair value, our DCF model takes a different stance. According to this approach, TOTO’s current share price of ¥3,859 stands above our calculated fair value of ¥3,338.87. This suggests the market may be overestimating the company’s future cash flows. Does this mean investors are paying too much for TOTO’s growth potential?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out TOTO for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 870 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

If you see the story differently or want to explore the numbers on your own terms, you can quickly build your own view and Do it your way.

A great starting point for your TOTO research is our analysis highlighting 1 key reward and 3 important warning signs that could impact your investment decision.

Don’t limit your strategy to just one stock. Give yourself an edge by targeting investments with attributes that fit what you want for the future.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include 5332.T.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

“Nvidia builds the GPU (graphics processing units), but we also build the CPU (central processing units), the networking, the switches, and so there are a lot of chips associated with Blackwell,” Huang told reporters at an event held by Nvidia’s longtime partner Taiwan Semiconductor Manufacturing Co in Hsinchu.

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TSMC CEO C.C. Wei said that Huang had “asked for wafers,” but that the number was confidential.

“TSMC is doing a very good job supporting us on wafers,” Huang said during his fourth public trip to Taiwan this year, adding that Nvidia’s success would not be possible without TSMC.

Nvidia made history in October when it became the first company to reach a $5 trillion market value and TSMC’s Wei called Huang a “five-trillion-dollar man.”

When asked how concerned he was about memory shortages, Huang said that business was growing strongly and there would be shortages of “different things.”

“We have three very, very good memory makers – SK Hynix, Samsung, Micron – are all incredibly good memory makers, and they have scaled up tremendous capacity to support us,” Huang said.

Huang also said Nvidia has received the most advanced chip samples from all three memory makers.

When asked about possible memory price increases, he said: “it’s for them to decide how to run their business.”

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• Nissan Motor recently updated its earnings guidance for the first half of fiscal year 2025, reporting a substantially smaller operating loss than previously forecast and newly confirming plans to export China-made vehicles through a joint venture with Dongfeng Motor.

• The shift to an export-focused model in China aims to address weak local sales and excess capacity by targeting overseas markets, reflecting Nissan’s efforts to stabilize profitability during a period of operating challenges and global tariff pressures.

• We’ll examine how Nissan’s move to export China-made cars could influence its investment narrative and recovery efforts in key regions.

Uncover the next big thing with financially sound penny stocks that balance risk and reward.

To own Nissan shares today, an investor would need to believe in Nissan’s ability to restore its earnings profile through aggressive cost controls, successful execution of its China export plan with Dongfeng Motor, and recovery in core markets amid competitive and tariff pressures. The recent earnings guidance revision signals a smaller short-term operating loss, driven by one-off cost items, yet it does little to ease concerns over ongoing tariff impacts and negative free cash flow, which remain the main catalyst and risk for the stock.

Among recent announcements, Nissan’s full-year earnings guidance now includes a projected operating loss of JPY 275 billion, explicitly reflecting the effects of US tariffs. This directly ties to the most pressing catalyst: whether initiatives like exporting China-made vehicles and ongoing restructuring can counteract cost headwinds, and help prevent further strain on Nissan’s liquidity and margin recovery prospects.

However, investors should pay close attention to the risk that, despite recent positives, persistent cash outflows and tariff impacts could…

Read the full narrative on Nissan Motor (it’s free!)

Nissan Motor’s outlook anticipates ¥12,909.5 billion in revenue and ¥203.3 billion in earnings by 2028. This scenario assumes a 1.5% annual revenue growth rate and an increase of ¥1,018.5 billion in earnings from the current level of ¥-815.2 billion.

Uncover how Nissan Motor’s forecasts yield a ¥336 fair value, a 4% downside to its current price.

Simply Wall St Community members posted 3 fair value estimates for Nissan Motor, ranging from ¥110.65 to ¥430. The wide span of valuation views comes as the company faces ongoing operating losses and execution risks in its turnaround, inviting you to compare many perspectives on Nissan’s future direction.

Explore 3 other fair value estimates on Nissan Motor – why the stock might be worth as much as 22% more than the current price!

Disagree with existing narratives? Create your own in under 3 minutes – extraordinary investment returns rarely come from following the herd.

Early movers are already taking notice. See the stocks they’re targeting before they’ve flown the coop:

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include 7201.T.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

• State Street Corporation announced the official launch of its Middle East and North Africa Regional Headquarters in Riyadh, Saudi Arabia, after receiving approval from the Ministry of Investment Saudi Arabia, further solidifying its over 25-year presence in the region.

• This expansion, combined with a new minority investment in Coller Capital, a specialist in alternative investments, signals the company’s intent to boost its regional influence and strengthen its position in the fast-growing alternatives sector.

• We’ll consider how State Street’s move to establish its MENA headquarters sharpens its investment narrative around regional and alternatives growth.

Find companies with promising cash flow potential yet trading below their fair value.

Owning State Street stock rests on believing in the company’s ability to grow fee-based revenue through global asset servicing while withstanding ongoing fee compression and new technology in financial services. The newly launched MENA headquarters signals a push into growth regions and alternatives but does not meaningfully change the biggest catalyst, rising global wealth and ETF inflows, or the main risk of accelerated fintech disruption and platform innovation shortfalls in the near term.

Of the recent developments, State Street’s launch of the SPDR Portfolio Ultra Short T-Bill ETF (SPTU) is closely related, as it underscores the company’s focus on broadening its product set to capture more inflows and reinforce recurring fee revenue, key to offsetting margin pressures and supporting its investment case around scale and efficiency.

Yet with pressure from new tech entrants still building, investors should also be aware that…

Read the full narrative on State Street (it’s free!)

State Street’s narrative projects $14.7 billion revenue and $3.5 billion earnings by 2028. This requires 3.3% yearly revenue growth and a $0.9 billion earnings increase from $2.6 billion currently.

Uncover how State Street’s forecasts yield a $130.36 fair value, a 10% upside to its current price.

Fair value estimates from six individual members of the Simply Wall St Community span a broad range, from US$48.13 to US$248,121.66. While growth in assets under custody remains a core catalyst, these varied views show just how differently some investors assess potential future performance.

Explore 6 other fair value estimates on State Street – why the stock might be a potential multi-bagger!

Disagree with existing narratives? Create your own in under 3 minutes – extraordinary investment returns rarely come from following the herd.

Right now could be the best entry point. These picks are fresh from our daily scans. Don’t delay:

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include STT.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com