HSBC cuts Netflix to hold as YouTube takes record TV share

The latest:

Netflix shares fell about 2% after HSBC cut the stock to hold from buy, telling clients that audiences are turning away from its original programming. Total viewership hours for series that charted on Netflix’s top 10 lists in July and August dropped 17% year over year, according to the bank, which sees a further sequential decline in the third quarter and no near-term recovery in engagement.

Details:

• The downgrade: HSBC analysts moved Netflix to hold from buy, saying reception to the company’s original content is deteriorating. They pointed to a 17% year-over-year fall in viewing hours for top-10 charting series across July and August, and said third-quarter figures are tracking toward a sequential decline.
• The rival: YouTube captured a record 14.2% of US TV time in July, HSBC said, as more users treat the platform as a television service. Citing Bloomberg, the bank said YouTube has tightened its hold on leading creators through better payouts and is rolling out a Shows feature that mimics Netflix-style episodic series.
• The cost problem: HSBC said Netflix will likely have to spend more to shore up engagement, raising content outlays as subscriber interest softens. The analysts also flagged streaming fatigue, arguing rising subscription prices are damping appetite. Netflix stock was down 2.2% in the session covered by the YouTube note, and the bank did not publish a revised target price.
• The labor data: A Dallas Fed analysis found that after ChatGPT’s 2022 release, Texas graduates from majors more exposed to artificial intelligence saw a 1.7 percentage point lower probability of finding in-state employment within a year, compared with less-exposed peers.
• The wage gap: The same analysis reported that “students from more-exposed majors who found jobs after 2022 earned 5 percent lower wages relative to earnings changes for less-exposed majors.”
• The AI spending: Citi lifted its capital expenditure forecasts for Alibaba to 258 billion yuan in fiscal 2027, 283 billion yuan in FY28 and 282 billion yuan in FY29, up from 228 billion, 201 billion and 180 billion, citing the company’s target of 20 gigawatts of AI infrastructure by 2032. Citi kept a buy rating and a 189 Hong Kong dollar target.
• The Taiwan record: Taiwan’s Taiex closed 0.75% higher at a record 48157.29, led by chip and circuit makers. TSMC rose 1.6%, Foxconn 1.2% and MediaTek 0.1% to a new high. Barclays raised its Taiwan GDP growth forecasts to 12% this year and 5% next, citing strong tech exports.
• The summit outlook: Aberdeen Investments economist Robert Gilhooly said the US-China leadership summit is likely to center on tech and trade, potentially lowering tariffs on nonsensitive goods. He said Beijing may offer to buy more US farm goods, energy and Boeing aircraft, and that an AI-safety dialogue is plausible but probably thin on detail.
• The Pearson stake: Citi analysts said Pearson’s appointment of Cevian Capital partner Alex Svensson as a nonexecutive director is not read as a signal of strategic change. Cevian holds a 19.4% stake, according to LSEG. Citi has a neutral rating and a 13.45-pound target; shares slipped 0.25% to 11.95 pounds.

Between the lines:

The Netflix call rests on a comparison rather than a collapse: HSBC pairs falling viewership of Netflix’s charting series with YouTube’s record share of US TV time and its move into episodic programming. That framing implies the pressure is competitive, not cyclical, which is why the bank expects higher spending rather than a rebound.

What’s next

Netflix’s third-quarter engagement figures, which HSBC expects to decline sequentially, are the next test. Also watch the US-China leadership summit for tariff relief on nonsensitive goods and any AI-safety memorandum.