Banxia Investment: AI Bubble Trigger Conditions Have Emerged, Stay with Undervalued Domestic Demand Assets
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Li Bei, founder of private fund Banxia Investment, warned in her latest monthly letter that the trigger conditions for an AI bubble burst are already in place, urging investors not to chase the rally; she disclosed core positions concentrated in property, consumer, and building-materials stocks at deep-value multiples, betting on a structural repricing over the next two years.
The AI bubble — what signal is she seeing?
Li Bei's core call: the problem in the AI supply chain is not valuation — it is cooling demand. She cited a visible slowdown in ARR (annualized recurring revenue) growth at model companies such as Anthropic, arguing full-year numbers will likely miss market expectations.
This means → big-tech capex forecasts face downward revision — the money may not get spent as planned.
The chain is already splitting: large-cap tech stocks weakened first, GPU makers are under pressure, token prices have peaked; but training demand still supports compute leasing, and the bullwhip effect — where the far end of a supply chain amplifies small demand shifts — is keeping semiconductor sentiment elevated for now.
In plain terms = leading indicators have turned; lagging indicators are still climbing. This is the window to exit gradually, not to pile in.
How did they adjust — what was cut, what was kept?
Banxia has reduced overall exposure per its risk-control framework, clearing low-conviction fringe positions and concentrating the portfolio on core holdings.
Current net equity exposure sits at roughly 50%, with single-stock net exposure around 60%. The fund also holds put options on the Hang Seng index as a hedge.
Li Bei stated explicitly that she will not make further large-scale cuts to core positions — the thesis behind consumer, property, and building-materials leaders rests on rock-bottom valuations and company-level competitive advantages, not a short-term macro rebound bet.
Property at 25% of the portfolio — why so heavy?
Property is Banxia's highest-conviction bet, at roughly 25% of the portfolio. Li Bei argues the market still prices the sector at peak pessimism, even as some top developers have meaningfully improved operations.
Key data point: since the second half of 2024, select quality developers have seen net margins on new projects recover to around 10%.
This means → high-margin projects are already in the pipeline, but because real-estate settlement cycles typically run about two years, the profits have not yet shown up in reported financials.
Li Bei expects these projects to begin settling by 2027, unlocking a significant earnings release; at current market caps, the forward P/E is below 5x.
Consumer and building materials — why call mismatch an opportunity?
Banxia's consumer-leader basket has dropped to an average of under 10x P/E after recent declines, spanning express delivery, dairy, sportswear, and tourism services.
This reflects a stark mismatch: these companies once traded above 50x earnings; now they sit near 10x — yet their competitive positions are stronger than before.
In the building-materials sector, while the industry as a whole is loss-making, select leaders remain profitable and are gaining market share, trading at under 10x P/E with a dividend yield of roughly 5%.
In plain terms = even if the sector stays under pressure, dividends alone offer a stable return; if the property cycle stabilizes, earnings upside is substantial.
What about Banxia itself — what does the AUM shrinkage tell us?
Banxia's assets under management have contracted from a peak above RMB 10 billion to the RMB 2–5 billion range.
This reflects two forces: NAV drawdowns triggering some investor redemptions, and Li Bei's own decision to shrink the fund and prune fringe positions.
Her overarching thesis: the market's pessimistic pricing of domestic-demand assets is seeding a structural opportunity over the next two years — and whether AI's lagging indicators can hold up as leading indicators keep weakening will be the key test of that call.
Content is for reference only, not financial advice.