A recent rally in the shares of Hong Kong-listed Lenovo Group Ltd. LNVGY is expected to continue, largely driven by the global recovery of personal computer demand and excitement over the company’s AI-related products.
What Happened: The Chinese tech giant’s stock in Hong Kong has seen an impressive rise of over 30% since mid-October, making it the best performer in the Hang Seng Tech Index during this period. The surge has also resulted in a 60% jump this year, setting the company on course for its most robust annual performance since 2009, according to a report by Bloomberg on Monday.
The rally is partly due to indications of an end to the post-pandemic industry slump, spurred by cyclical demand for PC replacement and upgrades. Anticipation for new products benefiting from ongoing AI investments also fuels optimism for the stock’s continued bull run well into 2024.
Bloomberg Intelligence analyst Steven Tseng credits the optimistic outlook to the anticipated rebound in PC demand from late 2023 and increasing excitement around the ‘AI PC’ concept.
Why It Matters: Last month, Lenovo declared its aim for PC revenue growth this quarter, buoyed by signs of a long-awaited recovery, resulting in a less-than-anticipated profit decline. The company expresses confidence in its growth potential and ability to outperform competitors, citing its dominant market position and increased focus on commercial models.
Investor excitement about Lenovo’s first AI server project, which commenced this month, and the pipeline of products for next year also contribute to the stock’s momentum. Goldman Sachs Group Inc. analysts have expressed a positive view of Lenovo, citing its strategic position to leverage AI technology enhancements.
Despite the stock’s current high trading, Edmond de Rothschild Asset Management’s fund manager Xiadong Bao believes the outperformance can continue if management delivers guided results and if the market responds positively to local AI applications on high-spec AI PCs.
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