After several weeks of adjustments, technology stocks have regained momentum, posting consecutive gains this week. On Wednesday, the ChiNext Index rose over 2%, with computing power chips and the pharmaceutical sector performing strongly, particularly the computing power segment leading the market. The sector experienced volatile swings in Q4 due to significant earlier gains, which led to profit-taking after the Shanghai Composite Index surpassed 4,000 points, causing a temporary sharp correction. During this period of market volatility, investors were advised to rebalance portfolios or reduce exposure to overbought tech stocks to lower holding costs.
This tech bull market is expected to continue, likely standing as one of the few major investment themes this year. Sector rotation may accelerate in 2026, with more investment themes emerging, though tech stocks are projected to remain a key driver. Last Friday, amid the correction, investors were encouraged to maintain confidence and accumulate high-quality tech leaders at lower levels. This week’s rebound, particularly in computing power chips, was fueled by positive industry developments. According to TrendForce, major global cloud service providers are accelerating in-house AI ASIC development, with combined capital expenditure from eight leading CSPs—including Google, Amazon, Meta, Microsoft, and Oracle—expected to exceed $420 billion in 2025, signaling strong growth potential for chip demand. The current tech rally is underpinned by the Fourth Industrial Revolution, marked by AI’s rapid advancement and widespread adoption. China’s increasing investments in AI computing power, with multiple tech giants announcing expanded commitments, have further deepened the market uptrend.
On the consumer front, six government departments released a plan to enhance supply-demand alignment and boost consumption. The plan aims to optimize supply structures by 2027, creating three trillion-yuan consumer sectors and ten 100-billion-yuan consumption hotspots, while fostering globally recognized, culturally rich premium products. By 2030, a virtuous cycle of supply and consumption is expected to drive high-quality growth, steadily raising consumption’s GDP contribution. Consumer stocks have underperformed this year due to slowing income growth, with retail sales growth dipping to 2.9% in October. However, as capital markets recover and generate wealth effects, household asset income may rise, lifting retail sales and benefiting consumer stocks. Branded consumer goods—such as premium baijiu, traditional Chinese medicine, and F&B—collectively termed "Old Deng stocks," may see valuation rebounds in 2026, attracting funds wary of overextended tech valuations.
The A-share market’s structural bull run could transition into a broad-based rally in 2026, with sector rotation progressing from "Small Deng" (tech) to "Mid Deng" (new energy, defense, power equipment, and non-ferrous metals) and finally "Old Deng" stocks. Year-end attention is shifting to high-dividend sectors for stable returns, while oversold tech growth stocks may rebound, offering opportunities. Compared to U.S. tech giants, China’s top 10 tech firms’ combined $2.5 trillion market cap lags behind their $25 trillion U.S. counterparts, suggesting ample room for growth. Technological innovation, especially AI’s transformative potential across industries, mirrors the internet’s historic impact, promising long-term investment opportunities.
China’s rising global influence aligns with its 15th Five-Year Plan’s focus on tech innovation, including embodied AI, semiconductors, computing power, low-altitude economy, solid-state batteries, and deep-sea equipment—key drivers of this bull market. Historically strong January credit growth and seasonal liquidity inflows, coupled with the pre-Q1 earnings lull, could fuel a "spring offensive" in A-shares. Investors are advised to stay patient and confident, capitalizing on the prolonged bull market in A-shares and Hong Kong stocks for solid returns.
(MACD golden cross signals formed in select stocks, indicating bullish momentum.)
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