Yunzhou Capital's latest market outlook suggests the current phase is a "mid-bull rest," while AI has reached its "Google Moment." In November, equity markets experienced volatility, with major tech indices continuing their correction. The ChiNext, STAR 50, and Hang Seng Tech indices saw similar declines, while the Shanghai Composite Index largely absorbed earlier pressures above the 4,000-point level.
Domestically, anti-involution policies across industrial sectors are expected to stabilize and lift industrial product prices, potentially improving PPI deflation trends. For instance, in the deflation-hit new energy sector, prices for lithium batteries and wind power products have stabilized and rebounded since H2 2024, while solar anti-involution measures began in H2 2025.
Weak demand expectations in real estate and infrastructure, coupled with global trade uncertainties, are driving Chinese manufacturing investments overseas. Domestic capacity expansions are likely to remain cautious. By 2026, PPI and CPI may gradually turn positive, exiting deflation. However, asset deflation risks persist, exemplified by China Vanke's bond defaults, signaling the final phase of real estate sector deleveraging. Accelerating home price declines in Tier 1-2 cities since Q3 have intensified household asset depreciation pressures.
The dual impact of real estate asset shrinkage includes: (1) continued pressure on consumption growth, potentially requiring macroeconomic stabilization policies in 2026; and (2) a shift in RMB asset allocation toward equities, as high-quality listed companies become scarcer compared to low-yield real estate and bonds.
Accelerating independent tech innovation and seizing the AI revolution are critical for China's economic breakthrough. The U.S.-China AI race is intensifying, with the U.S. leading overall, while China leverages strengths in open-source models and power infrastructure. Against the backdrop of real estate deleveraging and manufacturing deflation reversal, technology remains China's key offensive sector.
Yunzhou Capital maintains a bullish long-term view on Chinese capital markets, emphasizing leading companies across sectors, particularly in "AI+." The current "mid-bull rest" phase offers a strategic opportunity to research and position for 2026.
**AI Industry Outlook** Recent debates about an "AI bubble" reflect early-stage exuberance. Key observations: 1. The AI revolution, ignited by ChatGPT 3.5 in late 2022, will span decades, transforming productivity and lifestyles. AI models have evolved from chatbots to AI Agents, enhancing efficiency across industries with rapid 1-2 year upgrade cycles. 2. AI infrastructure development parallels historical tech waves (steam, electricity, internet). Critics question OpenAI’s $140B Capex plan against $10B revenue, but dynamic growth—potential revenue scaling to $100B—and rational Capex by giants like Alphabet, Microsoft, and Amazon suggest sustainable expansion. 3. Mass AI adoption hinges on three steps: - Step 1: Massive user bases (e.g., GPT’s 800M weekly users; China’s Doubao at 250M MAU). - Step 2: Vertical monetization (e.g., coding/video-generating Agents achieving breakthroughs in 2025). - Step 3: Systemic "AI+" acceleration—Alphabet’s Gemini 3 launch marks a pivotal "Google Moment." If AI models significantly enhance global user experiences and economic value, adoption will enter a new phase.
The "AI bubble" discussion signals localized overheating giving way to broad-based acceleration. Post-"Google Moment," global AI infrastructure advancements and application depth will be key investment themes.
During this "mid-bull rest," investors should stay disciplined, focusing on long-term opportunities in tech innovation and industrial growth.
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