As the first quarter of 2026 draws to a close, the investment principle that gains and losses stem from the same source is playing out once again in fund performance. Several top-performing funds from last year's technology bull run have seen their net asset values decline due to shifting market trends. For instance, multiple products heavily concentrated in the robotics sector have experienced double-digit pullbacks year-to-date. Against a backdrop of some clustered funds beginning to unwind positions and rotate from high to low valuations, the risks of betting on a single sector strategy have become starkly evident. While technology stocks remain the dominant market theme, some fund managers point out that as the market enters a "Darwinian moment," the perception of tech stocks must shift from "conceptual narratives" to "commercial realization" and "certainty in technological implementation."
Many of last year's star funds have seen a reversal in fortune this year. As the first quarter of 2026 nears its end, performance gaps have already widened among active equity products, with the sustainability of last year's top performers being a key market focus. Contrary to expectations, several funds leading the declines this year are precisely those that shone brightly last year. For example, a fund under a mid-sized public fund company in North China heavily invested in the "humanoid robotics" industry chain last year. Benefiting from the surge in related stocks, its net asset value soared by 99.27%, just shy of doubling. However, since the start of the year, as the robotics theme has cooled and related stocks corrected significantly, the fund has suffered a drawdown of approximately 23%, briefly ranking among the worst performers year-to-date. Additionally, two other funds from public fund companies in South China, also heavily weighted in robotics, have seen declines exceeding 20%.
Looking back at last year's robust "tech bull market," most technology stocks enjoyed valuation premiums. Consequently, themes like AI computing chips, low-orbit satellites, and the aforementioned humanoid robotics often delivered returns of 50% or even doubled. The significant profit-making effect attracted substantial capital inflows into these high-flying concept stocks in the second half of the year, leading to explosive growth in the assets under management of many funds at their performance peaks. However, entering 2026, rapid market rotation has led to a dual decline in both the valuations and investment theses of last year's leading stocks. Many of last year's star funds have delivered mediocre performance this year, with several that had doubled now showing double-digit losses. Analysis suggests the primary reason is that most of these previously top-performing funds employed an extreme single-sector strategy. While such a strategy maximizes upside potential through concentrated holdings during a bull market, it lacks defensive qualities during a downturn, making it highly vulnerable to drawdowns.
"Profits and losses sharing the same origin is the most fundamental, yet cruel, rule in investing," commented a fund manager from North China.
Technology Stocks Remain the Main Theme Despite energy and non-ferrous metals themes briefly leading the performance charts earlier this year due to geopolitical influences, the funds currently outperforming are still predominantly focused on technology. As of March 20, GF Vision Select led with a gain of over 49%. At the end of last year, this fund's top holdings were exclusively memory chip concept stocks. Furthermore, other funds with gains exceeding 30%, such as China Life-PMI Digital Economy, China Life-PMI Industrial Upgrade, and Red Soil Innovation New Technology, also have significant exposure to various technology sectors.
"Standing at the beginning of 2026, the A-share technology sector is undergoing a structural transformation in quality," said Tang Xiaobin, a fund manager at GF Fund Management. If the period from 2023 to 2025 represented a "big bang" for AI technology, marked by hype and disorderly competition, then 2026 may mark the arrival of a "Darwinian moment."
Xu Chengcheng, a fund manager at Industrial Fund Management, believes the future trajectory of the technology style will depend on the mutual reinforcement of industrial growth trends and actual earnings delivery. The certainty of performance within the technology industry is expected to be the core theme for tech investing in 2026. Using the artificial intelligence industry as an example, Xu noted that market perception has shifted from "conceptual narratives" to "commercial realization" and "certainty in technological implementation," leading to significant divergence within the sector. Against the backdrop of generally high valuation levels for the tech industry, Xu observes capital flowing towards sub-sectors with genuine profit support, independent controllability, and global competitiveness.
Guo Weiling, a fund manager at Da Cheng Fund, also pointed out that the technology rally is expected to continue into the first half of 2026, still primarily revolving around AI. However, structural opportunities will outweigh broad market gains, and overall investment difficulty is anticipated to be greater than in 2025.
Investment Requires Attention to "Crowding" Notably, during last year's tech bull market, even many value-oriented funds emphasizing "stability" succumbed to adding stocks related to computing power and robotics to their portfolios. Driven by the logic of an AI super-cycle, valuations of related tech leaders were pushed to historical extremes. However, the investment thesis for tech stocks ultimately transitions from "vision-driven" to "profit verification." When concerns emerged earlier this year about the slower-than-expected monetization pace of AI capital expenditures, high price-to-earnings ratios became a Sword of Damocles hanging over fund net asset values. With the Federal Reserve's interest rate cut trajectory becoming uncertain and the global AI supply chain entering a "painful investment phase," these high premiums are undergoing a sharp mean reversion, as evidenced by the decline in the robotics sector and the sluggish performance of PCB and CPO segments.
Furthermore, as profitable opportunities attracted massive inflows into these sectors, positioning convergence increased significantly. Therefore, besides valuation concerns, extreme trading crowding has also been a driver of the performance reversal. Data shows that in December last year, the daily turnover of the CSI TMT Index consistently ranged between 200 billion and 250 billion yuan, far exceeding that of consumer, cyclical, and financial sectors, making it the "main force" in A-share trading. Additionally, a research report indicated that institutions' significant increase in tech allocations came at the expense of reducing exposure to consumer and financial sectors, whose allocation ratios fell to historical lows since 2010. The extreme migration of capital from traditional sectors to tech sectors further elevated the crowding in tech stock holdings.
A public fund manager in Shenzhen told a reporter that once market sentiment shifts—such as with the recent outperformance of dividend assets and value stocks this year—institutional funds, aiming to defensively reposition or adjust their portfolios, inevitably sell last year's popular stocks. In an environment with relatively weak buying interest, such collective selling can easily escalate into a "stampede effect." "The strength of last year's rally logic is matched by the intensity of this year's sell-off momentum," the manager said.
The manager further pointed out that the recent popularity of "HALO" assets is ultimately a result of the AI sector's outperformance over the past two years, leading capital to seek more reasonably priced alternatives. When risk appetite decreases, these funds primarily seek out companies with strong physical moats and irreplaceable operational advantages.