As the third quarter draws to a close, the A-share market is once again playing out a familiar script of index bottoming amid structural market breakthroughs. Over the past month, the market has followed a textbook sequence of sharp declines, shrinking volumes, and then a rapid rebound. This pattern of deep sell-offs followed by quick recoveries underscores a key point: in sectors with clear industrial trends, capital is merely waiting on the sidelines rather than exiting entirely.
Elevated U.S. Treasury yields are capping the index's upside potential, while domestic industrial fundamentals are driving the market's internal structure. Looking ahead, the primary focus remains on the AI hardware computing chain. First, the authenticity of overseas computing demand has been consistently validated. A leading global database software provider posted quarterly revenue of $19.3 billion, a 30% year-over-year increase, with IaaS revenue surging 121% and remaining performance obligations (RPO) reaching a substantial $664 billion. The company also maintained its full-year capital expenditure guidance of $90 billion to $95 billion. A top global AI computing company's stock price is approaching historic highs, and risk appetite in the overseas AI supply chain is recovering—this represents the strongest fundamental support on the demand side.
Second, optical modules and co-packaged optics (CPO) remain the segment most poised to convert demand into profits. At September's Shenzhen OptoElectronics Expo, a leading firm showcased its 3.2T NPO solution, marking a shift for NPO/CPO technology from concept validation to industrial deployment. On the fundamentals side, current FCC rules do not classify optical modules as a separate restricted category, providing a temporary relief from the policy risks that have long weighed on the sector.
Third, the storage supercycle is forming a synergy with the domestic supply chain. In the third quarter, server DDR5 contract prices rose another 13% to 18% quarter-over-quarter, while LPDDR5x prices are expected to surge 100% to 150% in the second half of the year, potentially sustaining a supply shortage. Combined with a leading global ICT infrastructure and smart terminal provider's upcoming conference and the "15th Five-Year Plan" for the electronic information manufacturing industry—which targets ¥30 trillion in revenue by 2030—the order visibility for domestic computing power, semiconductor equipment, and materials is improving.
Fourth, the valuation mismatch in the brokerage sector warrants attention. Listed brokerages saw their combined net profit attributable to shareholders jump 49.2% year-over-year in the first half, with average daily trading volumes reaching ¥2.7 trillion and ¥2.3 trillion in July and August, respectively. Yet the sector's price-to-book ratio stands at just 1.27 times, around the 16th percentile of the past decade, leaving a roughly 24 percentage point gap to close relative to the broader market, signaling ample room for recovery.
However, risks must also be acknowledged. Fluctuating overseas interest rates and rate-hike expectations continue to disrupt global risk appetite, third-quarter earnings previews will only begin in October, and late September may see profit-taking ahead of the holiday season. Sideways trading with subdued volumes could remain the norm for now. Yet the direction is clear: in a September defined by index bottoming and structural leadership, staying focused on the AI hardware computing chain—where earnings are materializing and pullbacks have been deep—alongside undervalued sectors like brokerages, may still offer the most favorable risk-reward profile.
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