The progress bar for 2026 is nearly halfway through. The A-share market in the first half of the year can be aptly described as "intense." The Shanghai Composite Index reached a high of 4258.86 points, the Shenzhen Component Index hit 16207.75 points, and the ChiNext Index continuously refreshed its historical highs. While AI and semiconductors surged ahead, consumption and financial sectors provided intermittent support, leading the market through a structural slow-bull trend amid divergences.
As the May window closes, brokerages' mid-term strategies have been released one after another. How will the A-share market perform in the second half of the year? Institutional views suggest that the market is entering the second half of a bull market, driven by both valuation and earnings. Regarding specific investment themes, brokerages unanimously agree that the AI theme will not fade; instead, it will enter a new phase of "careful selection and deep exploration of the industrial chain."
Market confidence in going long is high. For a more reliable assessment of the first half's "report card," let's examine the data. As of May 29, the total market capitalization of A-shares was approximately 131.95 trillion yuan, an increase of 7.29% from the beginning of the year. Over the past month, the average daily trading volume has remained around 3 trillion yuan, indicating a clear "ample liquidity" market characteristic. The balance of margin trading and securities lending achieved a historic breakthrough. On May 25, it exceeded 2.9 trillion yuan for the first time, and over the past four trading days, it has continued to climb, demonstrating strong market confidence as leveraged funds enter the market.
Sector performance has been quite divergent. The AI computing chain has become the market's "top performer," with semiconductors, optical communications, CPO, and liquid cooling sectors leading the year-to-date gains, showing strong willingness for capital concentration. Meanwhile, major consumption sectors such as baijiu and pharmaceuticals have been consolidating at the bottom, while cyclical varieties like coal and chemicals have quietly strengthened, forming a pattern of "technology on the offense, cycles on the defense."
Founder Securities Co.,Ltd. believes that A-shares had a remarkable start in the third year of the bull market, driven by both PPI and the technology industry. Looking ahead to the second half of the year, A-shares are expected to enter the second half of the bull market, a new stage driven by both valuation and earnings. In the past three significant bull markets (2005-2007, 2014-2015, and 2019-2021), the CSI 300 Index reached highs around 5500 points. Considering the varying market sentiments during the peak phase, fluctuations of around 300 points are possible. The current bull market is advancing toward its fourth major peak. The CSI 300 Index has risen over 50% from its low in 2024. If it reaches 5500 points, there is still approximately 13% upside potential. In terms of timing for the second half, the third quarter is expected to outperform the fourth quarter. Beyond the calendar effect, core factors for the third quarter include expectations of price increases during the economic peak season, accelerated domestic AI development, and head-of-state diplomacy. The impact of the U.S. election in the fourth quarter warrants attention. Regarding theme selection, a bull market typically has at least two main themes, following a rotation sequence from high-growth technology sectors to undervalued and policy-driven sectors. The main themes of this bull market are AI and HALO assets.
Three specific sub-directions are worth focusing on. In its mid-term strategy released on May 27, Citic Securities Company Limited stated that as the absolute "center stage" of the first half, the investment logic for AI has shifted from "who is building AI" to "who can adapt to AI." The explosion in hardware "volume" and the "implementation" of applications have become core focal points. Therefore, the AI trend in the second half of the year will no longer follow the rough model of "blindly buying chips" but will enter a new phase of "careful selection and deep exploration of the industrial chain."
Huatai Securities uses the "singularity" theory to divide the AI industrial chain: computing infrastructure such as storage, CPO, and liquid cooling has entered the "singularity" stage, with rapid penetration rates and potential for a "Davis double-click." Domestic large models, cloud services, and industry applications are still in the introductory phase, with greater expectation gaps. In simpler terms, computing hardware is the "foundation," domestic substitution is the "added value," and application implementation is the "breakout point."
Specifically, three sub-directions are worth close attention: First, computing hardware, including HBM storage, advanced packaging, high-speed optical modules, and liquid cooling equipment, benefiting from the global explosion in AI server demand, with orders scheduled until the end of the year and high earnings certainty. Second, domestic AI computing, including domestic CPUs, GPUs, and AI chips, which are breaking through from "usable" to "excellent" under the support of independent and controllable policies, with broad substitution potential. Third, AI applications, such as intelligent driving, robotics, enterprise services, and media e-commerce, which are accelerating commercialization with the implementation of Agent intelligence, potentially giving rise to leading players in sub-sectors.
Of course, the AI sector has seen significant short-term gains and may experience volatility in the future. However, brokerages unanimously agree that AI is far from reaching a bubble stage, and every pullback represents a layout opportunity. The key is to avoid small-cap stocks driven purely by speculative concepts and lacking earnings support, and instead focus on leading companies and genuine growth.
In Friday's article, based on this year's first-quarter reports and last year's mid-year and annual reports, companies likely to continue rapid earnings growth in this year's mid-year reports were screened. Statistics show that some companies have already officially released mid-year earnings forecasts, including several from the AI industrial chain.
For example, Luxshare Precision Industry Co.,Ltd., a concept stock in optical communications, stated that in the first half of 2026, the company continued to leverage its advantages in diversified business layout, global production capacity allocation, and vertical integration capabilities. It deepened cooperation with core domestic and international customers, steadily advanced product development, customer onboarding, and key project implementation. Meanwhile, the company continued to enhance operational resilience and risk resistance in areas such as rapid customer demand response, supply chain improvement, cost optimization, and global delivery capabilities, driving steady overall growth during the forecast period. The company expects to achieve net profit attributable to shareholders of 7.84 billion to 8.106 billion yuan in the first half of the year, a year-on-year increase of 18% to 22%.
Fiber optic cable concept stock Changjin Photonics also predicted in its prospectus that the company's net profit for the first half of the year would be approximately 38.25 million to 41.45 million yuan, a year-on-year increase of 12.34% to 21.74%.
(Mentioned stocks are for illustrative analysis only and are not investment recommendations.)
Comments