Lenovo Wobbles As US Moves On Chinese Tech Companies & Concerns Over AI Boom

The big 2023 surge in Lenovo Group’s shares last year appear to be waning as concern about US-China tensions and soft demand takes effect on the world’s most successful PC company.

Last week Lenovo shares started to fall further, and by the weekend they had fallen 12% with further falls tipped as analysts realise that the AI boom tipped for brands such Lenovo are not materialising as quick as some observers expected.

The fall wiped out a combined A$2.76 billion in value as investors rushed to sell Chinese companies that may face sanctions by the US.

Lenovo has major investments in the USA, they also own the Motorola Mobility business with the Beijing-based Lenovo delivering both services and products to US agencies including security agencies in the US, Australia, UK and Europe.

Some are now questioning whether the fall back in share value was because the business was artificially pumped-up last year on optimism over replacement demand for products embedded with AI features.

At CES Lenovo revealed several new products featuring AI technology.

This year the stock is down more than 25% already in 2024 after surging 70% last year.

Bloomberg claims that China-linked stocks have struggled more generally amid economic concerns — and then last week a US draft bill was released that would block some Chinese biotech companies from accessing federal contracts, which accelerated Lenovo’s decline.

“Nowadays any negative news on China will trigger selling,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. Lenovo has slumped recently “because of concerns over the potential sanctions by the US. It’s hard to say the market is wrong.”

The PC market has been in decline for several months with Intel the largest maker of computer processors, claiming that sales are not strong in new guidance released last week.

Morgan Stanley has downgraded Lenovo, citing near-term earnings pressure.

“Weakened PC demand since November last year” may lead to downside in coming months, Morgan Stanley analysts including Howard Kao wrote in a note, citing slower inventory restocking demands recently.

In addition, investors may have gotten ahead of themselves with assumptions about how much artificial intelligence features will boost growth for leading computer manufacturers like Lenovo, Bloomberg Intelligence analysts Woo Jin Ho and Steven Tseng wrote in a note this month.

Lenovo logged net profit of US$426 million in the six months ended Sept. 30, a far cry from the US$1.1 billion it secured a year ago.

Lenovo ThinkCentre neo Ultra

The drop in revenue is due to the high base line last year, Lenovo said.

Most of Lenovo’s revenue is generated by its Intelligent Devices Group, which manufactures PCs, tablets, smartphones as well as other smart gear.

he total PC market of 2024 should see growth of 3.4% compared to 2023. AI Integration: The integration of AI capabilities into PCs is expected to serve as a catalyst for upgrades, hitting shelves in 2024 and at first aimed toward certain segments of the enterprise PC market.