The performance of U.S. stocks overnight was relatively weak, with the Philadelphia Semiconductor Index plunging 7.87% and the Nasdaq falling 2.21%. The pressure was primarily concentrated in the AI hardware and semiconductor sectors, which have high market concentration.
Initially, it seemed global tech stocks might face a widespread decline on Wednesday, June 24th. However, there was some resistance in the morning from Japanese and South Korean markets, with the South Korean stock market surging over 4% at one point.
This rally also provided a lift to Hong Kong-listed semiconductor stocks. The Huatai-PineBridge CSI Hong Kong Stock Connect Information Technology ETF (159131), previously discussed as a potential comprehensive alternative to the Hang Seng Tech ETF, saw gains exceeding 4%.
Observing the K-shaped divergence between the Hang Seng Tech Index and the Huatai-PineBridge CSI Hong Kong Stock Connect Information Technology ETF since April this year, one can't help but reflect on the importance of strategic selection over mere effort.
Extreme Intraday Swings in South Korean Stocks
The South Korean stock market is experiencing rollercoaster-like movements that now occur within a single trading day. After rising over 4% in the morning, the market suddenly plunged mid-session, only to rebound again in the afternoon and climb over 3.7%. Such extreme volatility suggests the market has entered a highly erratic phase.
Currently, the South Korean market resembles an even more concentrated version of an ETF, as its core assets consist of fewer than 10 major stocks. With a lack of large-scale unicorn listings in South Korea, the market's composition is heavily centered on companies like Samsung and SK Hynix.
Consequently, such dramatic fluctuations are becoming increasingly commonplace. The primary reason for monitoring the South Korean market is that its memory chip sector is, in many ways, an absolute core component of the current market trend.
As a key AI asset, stocks in the South Korean market, much like core U.S. counterparts such as Nvidia and Micron, are highly sensitive to capital flows. Any weakness in these areas tends to drag down related stocks in other markets.
Despite recent negative narratives—such as slowing HBM capacity expansion, potential order cuts from Nvidia, renewed expectations of Federal Reserve rate hikes, and South Korean regulators considering limits on leveraged trading—the underlying cause is similar to the earlier situation with gold: a result of excessive trading concentration.
As signs of fatigue emerge in the AI sector, market sentiment is becoming increasingly apprehensive about high valuations. Regardless of how compelling the narrative, the market requires periodic consolidation. With the earnings season approaching, significant volatility seems likely.
Energy Security and the Rise of Energy Storage
Amidst ongoing geopolitical tensions, it's worth noting that U.S. crude oil and petroleum product exports have increased by 1.8 million barrels per day since the conflict began. The primary reason global oil prices haven't surged dramatically is the release of strategic reserves. If negotiations between the U.S. and Iran remain stalled, the supply-demand gap in the crude oil market could widen, potentially leading to a significant price spike once inventory buffers are depleted.
This context helps explain recent positive signals from certain political figures, with an apparent move towards de-escalation being confirmed overnight. Regardless of specific developments, these events have highlighted the vulnerabilities of a global energy system overly reliant on fossil fuels, elevating the importance of energy security.
This is partly why energy storage battery stocks experienced a rally in March, buoyed by their "non-reliance on fossil fuels." However, the recent surge in the energy storage sector is not solely due to oil prices; the sector has performed strongly over the past two years, underpinned by high industry growth, supportive policies, and robust corporate earnings.
The year 2026 marks a significant milestone, as new energy storage was explicitly designated as one of six national emerging pillar industries. The power system is being elevated from a supporting role to a core pillar underpinning national energy security and the development of new quality productive forces.
Industry data confirms the energy storage sector is in a phase of rapid growth. Examining new energy vehicle orders from the previous week: from June 1st to 14th, the retail/wholesale penetration rate of new energy vehicles reached 64%/68%, compared to 62.9% for the entire month of May. Notably, the top ten best-selling models for the month no longer include any traditional fuel vehicles.
Just a year ago, breaking the 60% penetration threshold was a major topic. Now, penetration consistently remains above 60%, indicating that the electrification of China's passenger vehicle market is progressing far faster than industry predictions.
Given such impressive figures, it's unsurprising that Contemporary Amperex Technology Co. Limited (CATL) reported a Q1 2026 installed capacity of 99.5 GWh, a year-on-year increase of 15.2%, capturing a 40.7% market share—a record high for the period. Beyond CATL, second-tier manufacturers are also rising. Seven of the top ten companies in global Q1 2026 installed capacity are Chinese enterprises. It is arguably accurate to state that Chinese companies are becoming the dominant players in the global energy storage order landscape.
Another highly imaginative driver for energy storage batteries stems from the AI revolution. AI computing loads can fluctuate by up to 50%, and instantaneous high-power surges from GPU clusters can easily destabilize grid voltage. Furthermore, wind and solar power generation is intermittent during the day, making it impossible to rely solely on these sources to meet the 24/7 uninterrupted power demands of computing.
As policies restrict long-term reliance on thermal power to supplement green energy shortfalls, high-energy-consumption computing faces a natural power supply constraint. Currently, energy storage appears to be the only viable solution. For instance, in 2025, the annual energy consumption of national AI Data Centers (AIDCs) reached 77.7 billion kWh, with electricity costs accounting for over 60% of total operational expenses for computing parks.
The Energy Storage Investment Focus: The New Energy Battery ETF
Therefore, demand for energy storage batteries remains robust. Whether driven by new energy vehicles, energy storage systems, or data center backup power, battery demand is being pulled from multiple directions. However, it's important to note that aside from super-leaders like CATL, the industry has expanded capacity too rapidly in recent years, leading to intense competition among second and third-tier manufacturers. Strong demand does not guarantee gains for every stock in the sector.
For those interested in this sector, considering the Huatai-PineBridge CSI New Energy Battery ETF (159071) may be a more prudent approach than betting on individual stocks.
This ETF tracks the SZSE New Energy Battery Index (980027). Among the three mainstream battery indices in the market, the SZSE New Energy Battery Index (980027) is the most focused on the core segments of energy storage.
The index comprises 50 constituent stocks, with energy storage being its most distinct characteristic. It covers upstream and downstream industries related to energy storage batteries. The top three weighted sectors are lithium batteries, inverters, and other power equipment, collectively accounting for 67.3% of the weight.
Energy storage battery constituents include: Contemporary Amperex Technology Co. Limited (CATL), EVE Energy Co., Ltd., Gotion High-tech Co., Ltd., Sunwoda Electronic Co., Ltd., and Narada Power Source Co., Ltd.
Energy storage inverter/Power Conversion System (PCS) constituents include: Sungrow Power Supply Co., Ltd., Deye Ltd., Ginlong Technologies Co., Ltd., GoodWe Technologies Co., Ltd., and Canadian Solar Inc.
Energy storage temperature control/thermal management includes: Envicool Technology Co., Ltd.
Energy storage system integration and supporting components include companies like MegaMind Technologies Co., Ltd., Kehua Data Co., Ltd., and Jinpan International Ltd.
The inclusion of companies like Envicool Technology, a leader in precision temperature control benefiting from both the energy storage and data center sectors, as well as smaller-cap companies like MegaMind Technologies and Kehua Data in the PCS and power equipment space, is due to the index's methodology of including leading firms while also incorporating more small and mid-cap companies.
Consequently, the SZSE New Energy Battery Index tends to exhibit greater elasticity compared to indices like the SZSE New Energy Vehicle Index or the CSI Battery Theme Index. From January 1, 2020, to June 23, 2026, the SZSE New Energy Battery Index achieved a cumulative gain of over 246%, outperforming both the CSI Battery Index and the SZSE New Energy Vehicle Battery Index over the same period.
A friendly reminder: while the market narrative currently strongly favors AI hardware, for those considering allocations in relatively undervalued areas, the energy storage battery sector—characterized by high growth, strong earnings, and valuations that are not excessively high—could represent a viable option.
For those still focused on investment opportunities in AI application software, believing that hardware's ultimate value lies in software, the Huatai-PineBridge CSI Software Development ETF (159036) is one available instrument for consideration.
This ETF tracks the CSI All Share Software Development Index. Its underlying holdings have significant weightings in AI applications (46.58%), cloud computing (43.50%), the information technology innovation industry (42.36%), and fintech (29.90%), providing exposure to three major themes: AI applications, cloud computing, and IT innovation.
Interested investors are encouraged to conduct further research independently.
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