Xia Junjie, the head of the prominent Chinese private fund Ren Bridge Asset, has made a rare public statement, offering an in-depth analysis of the current market complexities.

Known as a contrarian investor, this fund manager seldom comments directly on index movements. However, he provided a penetrating interpretation of the weak performance of the Hang Seng Tech Index.

Xia Junjie pointed out that while the AI wave has altered market dynamics, leading to short-term pressure on tech stocks, this is more attributable to crowded capital flows rather than a fundamental collapse.

He emphasized that, with US stocks oscillating at high levels and complex geopolitical situations, "cheapness is the ultimate rationale." Chinese assets, with their valuation advantages and the resource barriers of leading companies, are becoming a relative safe haven in an uncertain environment. Their long-term allocation value is becoming increasingly clear.

The conditions for an AI bubble to inflate may no longer exist. Regarding the AI bubble theory, Xia believes the market's focus is quietly shifting away from the computing power sector. Even as their earnings materialize, the underlying investment thesis is being undermined.

"When attention gradually shifts from the capital expenditures of the seven US tech giants to their free cash flow, the soil for the bubble to continue inflating may no longer exist," he stated.

He presented the following evidence: Microsoft's stock has fallen 30% from its peak; Google's stock fell despite reporting explosive data; and Nvidia's unusual stock performance following its recent quarterly report. All these signs seem to indicate a qualitative change in the underlying logic or narrative in the capital markets.

Analyzing from a broader perspective, Xia Junjie, skilled in contrarian strategies, commented: "When the future direction and landscape of AI become increasingly unclear, while every participant is charging ahead blindly, rational investors will inevitably choose to vote with their feet. This process may have quietly begun; although it's still a non-mainstream murmur, it's only a matter of time."

The Hang Seng Tech Index has been the worst-performing major index recently. From October last year to now, it has accumulated a decline of over 25%, essentially returning to its levels from April of the previous year.

The composition of this index broadly includes three types of assets: internet companies; consumer electronics and tech hardware; and automotive and home appliance sectors.

Xia Junjie observed that each of these three industry assets likely faces its own set of challenges. For instance, internet platform companies are being drawn, willingly or not, into the AI wave, where conservatism carries its risks and aggression presents its own problems.

Furthermore, consumer electronics and tech hardware are confronting the objective reality of significantly rising memory prices.

Additionally, the automotive and home appliance sectors are experiencing sluggish sales following the phase-out of policy support.

Xia Junjie concluded that behind the Hang Seng Tech Index's weakness, there indeed exist certain objective facts; it cannot be considered entirely an undeserved "mis-hit."

Regarding the essence of the decline, Xia Junjie offers a more "penetrating" observation on this growth index's drop: Over the past two to three years, investor allocations to the Hang Seng Tech Index became overly crowded, both from overseas funds and mainland southbound capital. Therefore, capital flow issues may outweigh fundamental problems.

Following this logic, he believes investment opportunities are becoming clearer after this round of index decline. "After all, these companies still represent some of China's finest enterprises. Even in the context of AI, it is not easy for new companies to replace them, and the capital-intensive nature of AI ensures these companies hold an absolute advantage in capital and resources," he summarized.

The fund manager also offered a low-probability pessimistic scenario: history has seen small companies disrupt large ones, and they remain vigilant, but clearly, that time is not now.

So far this year, US stocks have been volatile at high levels, while South Korean and Japanese markets have surged significantly. These markets indeed face potential for substantial fluctuations in the future, compounded by the rapid evolution of the Middle East conflict, making the investment environment evidently more complex.

Based on this, Xia Junjie advises investors: the more complex the market, the more one immutable truth holds - cheapness is the ultimate rationale.

Finally, he positioned Chinese assets from an international market perspective: Chinese assets remain the cheapest and most stable among major markets. Such assets become a relative safe haven in uncertain environments. The determinants of our market trajectory remain internal factors, not external ones.