Since the significant policy announcement on September 24 last year, the A-share market has experienced two strong upward movements. The first surge began immediately following the policy announcement on September 24, with the market rising nearly 1,000 points in just a few trading sessions, displaying a broad-based rally pattern. After reaching a daily trading volume exceeding 3.4 trillion yuan on October 8, the market entered a consolidation phase. The second phase launched in the first quarter of this year, with the humanoid robot sector leading the charge, officially marking the arrival of the technology stock rally. The tech bull market has become the most prominent characteristic of this bull cycle.
The first quarter focused on humanoid robots, the second quarter on innovative pharmaceuticals, and the third quarter saw the tech bull market expand further, with computing power, algorithms, artificial intelligence, and other technological innovation sectors taking turns to rise. Many tech stocks achieved double-digit gains, demonstrating significant wealth creation effects. Technology stocks represent an important direction for new quality productive forces and are expected to be included in the 15th Five-Year Plan. Investors maintain positive and optimistic expectations for the prospects of technology innovation stocks, which has also driven the rise of artificial intelligence-related equities. Both policy support and technological advancement have jointly supported the sustained rally in tech stocks.
We are currently in the midst of the fourth technological revolution, with the widespread application of artificial intelligence being its most important characteristic, similar to the internet technology revolution. "Internet + traditional industries" gave birth to a group of great companies, particularly technology internet giants that grew into large enterprises by leveraging the internet in consumer markets. In the AI era, "artificial intelligence + traditional industries" is also expected to empower more great companies. "Artificial intelligence + consumption" represents an important future direction, with robots being the best landing scenario for "AI + consumption." Therefore, I believe this AI-driven tech bull market is expected to span the entire bull cycle.
This bull market is expected to be not a short-term phenomenon but rather a slow and long bull market that could persist for an extended period. The rally that began from the end of June represents the second wave of this bull market, with potential third and fourth waves to follow.
The key to this tech bull market lies in the backdrop of economic transformation. Many traditional industries face overcapacity and sluggish operations, particularly real estate-related industrial chains, which have been affected by declining real estate sales, with development investment declining consecutively and upstream industry demand falling. Traditional industry listed companies show low profit growth rates, with some even experiencing negative growth. Meanwhile, emerging industries, especially technology innovation sectors, are developing rapidly and attracting substantial capital inflows. The ancient poem "A thousand sails pass by the sunken boat, ten thousand trees flourish before the diseased tree" aptly describes this situation. Many overcapacity industries face operational difficulties while emerging industries are thriving.
Investment looks to the future rather than the past, so emerging industries representing future development directions command higher capital pricing. Of course, from the perspective of gains and price-to-earnings ratios, tech stock valuations show some local overheating this year, but from an incremental capital perspective, there remains significant room for growth. Tech stock valuations cannot be measured solely by traditional P/E methods but must consider whether technological breakthroughs can be achieved. If breakthroughs occur, future commercial applications will release performance and digest high valuations. Relying solely on traditional indicators like P/E ratios might cause investors to miss the tech stock bull market.
Take the humanoid robot sector, for example. Currently, most related companies originally manufactured automotive components and are now transitioning to robot components, with current performance mainly derived from automotive parts, not yet releasing robot component performance. These companies are mostly in preliminary stages, having just entered the supply systems of companies like Tesla, without large-volume orders yet. Therefore, investment must consider whether future performance can be delivered.
This year's robot rally focused on concepts - any company claiming to produce humanoid robots saw significant gains. Next year will test whether companies enter major manufacturer supply systems and secure substantial orders. Companies securing orders may continue rising, while those that don't might decline. The year after will test whether performance can be delivered - companies becoming industry leaders may become long-term bull stocks, otherwise they might retreat. Therefore, tech stock investment focuses on corporate core competitiveness, technological breakthroughs, and ultimate performance delivery capability.
Some sectors already show certain performance support, such as computing infrastructure, but performance hasn't been fully released, with P/E ratios remaining high, some reaching 80-90 times. However, investors focus more on future performance growth to digest valuations.
From public fund allocation to TMT sectors, the proportion hasn't reached historical peaks and may still have upward room. Simultaneously, a major transfer of household savings is underway. With declining deposit rates, household savings need outlets. Previously, funds mainly flowed to real estate, but now real estate investment opportunities have significantly decreased. Large amounts of savings may flow into capital markets through fund purchases or direct market entry.
July saw 2 million new stock account openings in a single month, rising to 2.8 million in August. New fund issuance is gradually recovering, with "daily limit funds" - equity funds selling out in one day - appearing. This indicates that household savings entering markets through funds has begun, bringing more incremental capital to capital markets and driving market deepening. Innovation sectors with large growth potential inevitably attract more capital, providing greater momentum for the tech bull market.
Tech stocks focus on the future rather than current or past performance. Traditional indicators like P/E and P/B ratios suit mature industry valuation comparisons, while technology innovation sectors look to the future. Tesla was loss-making for extended periods after listing, even facing cash flow risks, yet its stock price rose dozens of times. Investing in tech stocks requires examining whether future technological breakthroughs can be achieved, markets captured, and performance growth realized. Therefore, tech stock investment thinking differs completely from traditional industries.
The tech stock rally has intensified, currently representing over one-quarter of A-share market capitalization. Technology market cap has surpassed traditional sectors like banking, with chip leaders once exceeding consumer leaders in stock price, and high-end manufacturing leaders once surpassing consumer leaders in total market cap. This reflects investors' higher expectations for technology innovation companies and demonstrates economic transformation results and trends.
Previously, A-share's largest market caps were mainly traditional sectors like banking, petrochemicals, and liquor, with tech stocks generally having lower market caps. Major tech giants were mostly listed on US and Hong Kong exchanges. A-shares lacked large-cap tech companies. Now, tech companies capable of challenging traditional leaders have emerged, with increasing market cap proportions reflecting capital market expectations for economic transformation.
Of course, whether positions can be maintained ultimately depends on performance delivery and whether high expectations can be realized. If achieved, history will be changed; if not, there might be repetition of past patterns with significant stock price declines. We await developments while hoping tech leaders live up to expectations and become new engines of economic growth.
This year's tech stock rally resembles "rising tide lifts all boats" - both performance-backed and concept stocks performed well. Previously, concept stocks showed larger gains while performance-backed large-cap tech stocks lagged relatively. However, recent trends show style rotation, with performance-backed large-cap tech stocks beginning to lead while theme stocks without performance support are adjusting.
Investors are advised to adapt their thinking promptly, return to value investing, first selecting good industries benefiting from economic transformation, then choosing leading stocks. Leading companies have stronger risk resistance and higher winning probabilities. Tech industries show "winner-takes-all" characteristics - companies with performance support may stand out while those without may retreat. Investors can also diversify risks by allocating to tech funds, with professional fund managers selecting stocks to improve success rates.