Equity Research

The US tax “retaliation” from Section 899 targets foreign entities with “unfair” tax regimes—impacting many European companies with US operations. European companies exposed to the US keep underperforming amid higher uncertainty, higher tariffs, higher taxes, and a weaker dollar. As US assets lose appeal, European equity inflows have posted their strongest quarterly inflows in a decade.

We believe the key high-end CCL suppliers (EMC & TUC) will continue to enjoy solid demand from ASIC AI server and 800G switches in June-Sep, considering the increasing orders from key CSP customers, which should expand EMC/TUC's M8 grade CCL revenue contribution to reach 40%/30% in 2H25 (vs. 30%/15% in 1H25), leading to a much more favorable than expected revenue (we expect EMC/TUC revenue will go up by 10%/16% HoH in 2H25) and profitability outlook (M8 grade CCL's GM is generally 45%+ vs. EMC/TUC's 1H25 average GM at 30.4%/24.0%).