The technology sector has experienced volatility recently, with a strong rebound last week followed by repeated fluctuations this week, though rotations have emerged between sub-sectors. On Tuesday, the humanoid robotics segment stood out with a collective surge, likely driven by the upcoming IPO of a well-known robotics company. This firm, recognized as the first pure-play humanoid robot stock on the A-share market, has significantly boosted sentiment across the sector. After a period of adjustment, bargain-hunting capital has entered the fray, pushing the humanoid robotics segment higher against the broader market trend.

This week's pullback in tech stocks is a normal correction, not a sharp sell-off like before, and investor confidence is gradually recovering. Following the substantial market decline earlier, many investors lost confidence and even feared a shift into a bear market. My view remains clear: this rally is likely to extend for three to five years, rather than being a short-term flash. The recent tech sell-off was a bubble-squeezing exercise, not the end of the tech bull market. After this process, it actually paves the way for more sectors to emerge.

Where to focus

Since early July, I have been bullish on the innovative drug sector. Driven by policy support, valuations at their historical 10th percentile bottom, and an inflection point in earnings, this sector has staged a strong uptrend. Notably, shares of leading innovative drug companies have hit new year-to-date highs, greatly boosting investor sentiment. Mutual funds currently allocate only about 5.6% of their portfolios to innovative drugs, far below the historical average allocation and the sector's natural weight in the healthcare space. If the rally continues, it could attract significant institutional capital to rebuild positions, possibly sustaining the sector's performance. On May 11, authorities announced price protection for newly approved innovative drugs, explicitly exempting them from centralized procurement. This has alleviated many investor concerns, fueling the current rally. The innovative drug sector was almost the only tech segment to rise during the sharp tech sell-off in July. Many mistakenly classify it as a consumer healthcare sector, but its valuation of about 26x price-to-earnings still leaves ample room for upside compared to the historical peak of 55x. In fact, innovative drugs are a tech-driven industry. Unlike generics, they require heavy R&D investment to bring drugs to market, making them truly technology-intensive. In the AI era, artificial intelligence will empower drug discovery, accelerating the development of treatments for major diseases like cancer. In the short term, the innovative drug sector may face some pullback pressure after its recent run-up; but over the medium to long term, it remains worth watching, given the significant gap from its peak and valuations still below historical averages.

Why focus on six major tech tracks

Early last year, I proposed the concept of six major tech tracks. These sectors are now rotating, emerging as the true beneficiaries of the AI era: chip semiconductors, computing power and algorithms, humanoid robots, commercial aerospace, solid-state batteries, and biomedicine. In the first half of the year, chip semiconductors and computing power tracks surged, entering a major uptrend. When the market chased highs broadly in late May, I advised caution against the bubble-squeezing risk from rapid gains, suggesting deleveraging, halving positions, and diversifying into both tech and dividend stocks. This strategy has proven effective. After more than two months of decline, the bubble-squeezing process is largely complete, paving the way for a new recovery. More sectors are now rotating, including humanoid robots and innovative drugs. These six tracks represent the genuine beneficiaries of the AI era, key areas for investors to capture the tech bull market. However, since each track's earnings realization timeline differs, rotation patterns vary. I recommend investors seize these rotation opportunities by focusing on industry leaders.

Humanoid robots and chips

Humanoid robots recently corrected after expectations that Musk's Optimus V3 would debut in July or August were delayed. This is a short-term negative, not a long-term one, as the debut is inevitable. Musk has gradually exited the traditional EV space, pivoting fully into humanoid robots. He has shut down the Model S and Model X production lines in California, converting them into a facility with an annual capacity of 1 million humanoid robots, and plans to build a line in Texas with a capacity of 10 million units annually. This boosts expectations for mass production, so after the short-term adjustment, the sector now has a better recovery opportunity. Chip-related sectors, such as memory, packaging and testing, and semiconductor materials, remain the "pick-and-shovel sellers" of the AI era, with strong earnings potential. During the rebound, investors can continue to hold these positions, as the tech bull market is not over. At market highs, I advise overcoming greed and taking profits in a timely manner, avoiding chasing highs. After the market declines, it's crucial to overcome fear and not panic, but instead dip into high-quality leaders that have been unjustly sold off. The later stage of the tech rally will see divergence. Truly profitable, order-backed tech leaders will continue to perform, even hitting new highs, while companies with no substance behind hype and concepts will likely fall. I have already laid out the six tracks for investors; now it's about sector rotation, and investors can seek leaders within these tracks. Grasping the market trend—being bold to reduce positions at highs and brave to invest at lows, always seeking opportunities in quality tracks—is the correct way to capture the tech trend.

Market outlook and strategy

Looking at the overall market, after the recent decline, many investors need time to rebuild confidence, so rebounds will inevitably be choppy rather than straight-line surges. This is normal. Adopt a calm mindset toward market fluctuations, focusing on quality industries and companies benefiting from the AI era, to share in the rewards of this rally. Holding one part tech leaders and one part high-quality blue-chip stocks, especially dividend stocks, provides a balanced approach—offensive and defensive—leading to more stable returns. Deleveraging is essential. Once leverage is added, time becomes your enemy, not your friend; without leverage, you stay in the game and avoid being knocked out. Second, avoid betting on a single sector. Markowitz, a Nobel laureate, proposed portfolio theory, stating that the only free lunch in capital markets is diversification. Diversifying effectively reduces the risk of concentrated bets, smooths portfolio volatility, and supports steady upward movement. This is a principle worth deep consideration. The MACD golden cross signal has formed, and these stocks are performing well! This article is for reference only and does not constitute investment advice. Investors should act at their own risk.