On August 17th, a significant rebound swept across the Shanghai and Shenzhen stock markets, driven by a strong surge in the chip and semiconductor sectors. This rally has re-energized market sentiment, signaling the potential start of a new wave in the technology bull run. The afternoon session saw major indices climb sharply, with the Shanghai Composite Index rising over 1% and the Shenzhen Component Index and ChiNext Index both gaining more than 2%. The PCB (Printed Circuit Board) sector continued its upward trajectory, and the humanoid robotics sector also staged a notable recovery, creating a broad and positive market environment that is highly beneficial for boosting investor confidence.
A recently listed chip leader surged over 10% during the trading session, igniting widespread investment enthusiasm across the chip and semiconductor industry and triggering a wave of price limits. This development validates recent market assessments. The July sell-off in technology stocks is viewed as a process of squeezing out speculative bubbles rather than a bubble burst. The technology bull market remains the dominant trend, as the innovation-driven technology sector possesses solid earnings support and is a key beneficiary of government policy direction within the current economic transformation. While the technology sector experienced crowded trading and significant correction pressure in May and June, the substantial decline in July has made many high-quality tech leaders attractive again, leading to expectations of a technology resurgence. This viewpoint is now being confirmed.
Since early last year, the concept of six major technology sectors has been proposed, with the belief that this technology bull market will persist throughout the entire slow and long-term bull cycle. Supported by favorable policies and a shift of household savings into the market, this slow and long-term bull market could last for three to five years. The technology-driven bull market has always been a core investment theme, though leadership rotates among different sectors from time to time. The six key sectors identified are: chips and semiconductors, computing power and algorithms, humanoid robots, commercial aerospace, solid-state batteries, and biomedicine. These sectors are expected to benefit sequentially from the AI era. Indeed, several of these sectors have already taken turns leading the market, with chips, semiconductors, and computing power and algorithms being the primary outperformers over the past year.
The imminent listing of A-share's first humanoid robot company is a key catalyst for a new wave of growth in the sector. The recent adjustment in this area was primarily triggered by the short-term impact of Elon Musk's announcement regarding the delayed release of the new Optimus V3 robot. However, this does not change the long-term development trajectory of the industry. The robotics industry is considered a "long slope with thick snow" market, with vast development potential, and is expected to become the fourth major industrial sector after home appliances, smartphones, and new energy vehicles. Since the beginning of July, innovative drugs have also been one of the best-performing sectors, a trend that is attributed to three overlapping factors. First, strong government policy support has explicitly exempted innovative drugs from centralized procurement, which is instead applied to mature generic drugs. Second, the valuation of the innovative drug sector is at an attractive low point, around the 10th percentile of its historical range. Third, public fund allocation to innovative drugs is only about 6%, significantly below the historical average. This makes the sector an important investment theme. Currently, only the commercial aerospace and solid-state battery sectors have not yet begun to generate earnings or show significant upward momentum; they are expected to perform well starting next year.
The world is currently in the midst of an artificial intelligence revolution, with AI technology being the primary investment direction and the driving force of this technology bull market. Therefore, identifying tech leaders with strong earnings potential, or investing in sector-specific ETFs and thematic funds, could be a viable strategy. In June, when tech stocks were at high levels, the advice was to overcome greed, take profits in a timely manner, and mitigate the risk of a sharp correction from profit-taking. The recommended "three-step" risk management strategy involved deleveraging, halving positions, and maintaining a portfolio split between tech and high-dividend stocks. This strategy has proven effective, with many investors reporting that they successfully avoided the subsequent downturn by reducing their holdings in high-tech stocks. By August, after a significant correction in both time and price, with many tech stocks halving from their peaks, the advice shifted to focus on the value of these companies, encouraging investors to overcome fear and gradually build positions in undervalued tech leaders. This strategy is now also showing results.
The approach emphasizes value investing with Chinese characteristics. While learning from Warren Buffett's philosophy, it is important to adapt to local market conditions and manage portfolio positions appropriately to achieve effective returns. Recently, Berkshire Hathaway's second-quarter report revealed a significant change in strategy, ending 14 consecutive quarters of net stock selling. The conglomerate made a net stock purchase of nearly $20 billion in the quarter, reducing its cash reserve from $397.4 billion at the end of the first quarter to $365.5 billion, a decrease of $31.9 billion. This buying activity was concentrated on Alphabet, the parent company of Google, which is seen as a technology company with solid fundamentals and promising future prospects. In the second quarter, Berkshire Hathaway increased its stake in Alphabet by approximately 48.1 million shares, leading to a market value surge of over $17 billion. As of June 30th, Alphabet became Berkshire Hathaway's fourth largest holding, with a market value of about $37.8 billion, trailing only Apple, American Express, and Coca-Cola. In an interview, Warren Buffett stated that the investment in Alphabet was his idea, and that he had begun building the position gradually from the third quarter of last year. This move comes after Buffett previously admitted to regretting missing out on Google. A subsidiary of Berkshire Hathaway was an early customer of Google's advertising business, giving them an early chance to recognize its profit potential, but that opportunity was missed. Now, after years of waiting, Buffett has used his capital to make up for this past oversight. Besides Alphabet, Berkshire Hathaway also increased its stake in Delta Air Lines by about 44% in the second quarter, adding nearly $5.4 billion in market value. There were also minor increases in holdings of Macy's and homebuilder Lennar. The clear direction of the selling was in financial and consumer stocks. This indicates that after years of waiting, Buffett is beginning to increase his exposure to tech giants like Alphabet, but still holds a substantial amount of cash. It is too early to conclude that he believes the time is right for a massive increase in tech holdings. However, this is a positive signal, suggesting that Buffett is placing importance on leading tech companies and is seeking opportunities to allocate capital. The long-term development direction of the AI technology trend appears promising, and it is worth investors continuing to seize opportunities.
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