Looking back at the performance of the tech sector this year, stock indices related to technology in the U.S., A/H-shares, and other Asia-Pacific markets have generally outperformed broader benchmarks. Since August, this trend has become even more pronounced.
In the A-share market, the Shenwan Electronics, Communications, and Computer indices have significantly outpaced the broader market. The year started strong, buoyed by the rise of DeepSeek and a revaluation of China's domestic tech assets. However, market volatility increased in March and April due to sentiment shifts and trade agreement uncertainties, leading to a tech stock pullback. Despite this, tech stocks have remained resilient year-to-date.
From August onward, ample liquidity reignited investor interest in tech stocks, driving another wave of outperformance. However, risk-off sentiment resurfaced in October, prompting some institutions to lock in profits and withdraw capital from the sector, causing another dip. Overall, AI remained the dominant investment theme, benefiting computing, communications, memory chips, and upstream supply chains like EDA, semiconductor equipment, and foundries.
The Shenwan Electronics and Communications indices followed similar trajectories, lifted by DeepSeek's valuation impact and high liquidity conditions since August. The Electronics index includes companies tied to AI computing, storage, and communication chips, as well as PCB, advanced processes, and semiconductor equipment. Meanwhile, the Communications index features firms in the optical communication supply chain (e.g., optical modules, MPO), benefiting from AI narratives and domestic substitution trends. Both indices saw pullbacks in March and April due to external uncertainties.
The Shenwan Computer index experienced significant volatility in Q1, with software stocks gaining attention after the launch of DeepSeek-R1. However, hardware outperformed software from August onward, as AI applications remain in early stages, while upstream cloud providers continue increasing capex, and hardware/semiconductors face higher technical and trade barriers.
In Hong Kong, the Hang Seng Tech Index surged over 30% year-to-date, outpacing the Hang Seng Index, thanks to strong southbound capital inflows. Despite a sharper correction in March and April due to external risks, the sector showed resilience. From August, liquidity-driven rallies lifted tech, internet, biotech, and consumer stocks, though profit-taking emerged in November amid macro uncertainties like Fed rate cut delays and U.S. economic softness.
U.S. tech stocks faced early-year pressure as DeepSeek's emergence raised concerns over lower AI training costs, hitting high-end chipmakers. The NASDAQ 100 underperformed the S&P 500 in Q1. However, tariff worries eased in Q2, and robust earnings, coupled with sovereign AI chip orders (e.g., Nvidia, AMD) and cloud capex growth, fueled a rebound.
In Asia-Pacific markets, tech indices mirrored broader trends, with semiconductor and hardware strength driving outperformance since September. Storage price optimism for 2026 and resilient demand from smartphone/PC makers further supported the sector.
Looking ahead to 2026, analysts recommend focusing on AI and domestic substitution themes, particularly in hardware, to identify scarce supply chain opportunities.
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