In the second quarter of 2026, the A-share market displayed a clear structural divergence, with hardcore tech sectors represented by the STAR 50 Index and the ChiNext Index experiencing a significant rally. This was driven by a confluence of factors, including the AI industrial revolution, the rise of domestic computing power, and the accelerated pace of semiconductor import substitution. Entering July, volatility in the tech sector has increased. Market discussions have focused on the uniqueness of this tech cycle, changes in the market ecosystem, how to handle tech stock volatility, the effectiveness of fundamental analysis, and the evolution of investment research frameworks.
Wang Xianwei, fund manager of the China Universal Specialist and New Share Equity Fund, addresses key market questions in the context of the current globally synchronized AI industry cycle. He shares his investment approach and framework, advocating for a systematic upgrade of the analytical framework across three dimensions: shifting from "static valuation" to "dynamic lifecycle," from "single market" to "global industry mapping," and from "financial statement analysis" to "immediate supply chain verification."
How does this tech rally differ from past major cycles in A-share history?
Wang Xianwei states that this tech rally is an industry wave-driven bull market, powered by a general-purpose technology revolution and a substantive leap in corporate earnings. The defining characteristic is structural divergence, with only a few sectors, such as communications and electronics, posting positive returns. Even within the AI theme, significant divergence exists: core "picks-and-shovels" segments like computing power and high-end hardware have performed strongly, while most AI application segments have not yet seen their main uptrend. The key difference from past A-share main themes, such as the "Internet+" of 2013-2015 or the "New Energy+" of 2019-2021, is that those were primarily internal A-share themes. This AI cycle is a globally synchronized general-purpose technology revolution, characterized by "large scale, high growth rates, and sustainability," a scenario unprecedented in A-share history. The commonality lies in the presence of a clear market main theme and structural divergence.
Is the generational shift in fund managers a coincidence or a trend?
Regarding the notion of "young" managers (Xiao Deng) heavily investing in tech and "old" managers (Lao Deng) sticking with traditional assets, Wang Xianwei views it as a casual description. Age should not be the sole factor distinguishing portfolio styles. The tech sector itself is highly differentiated, so simply being a younger manager with more exposure to cutting-edge industries does not guarantee buying the best-performing stocks. This AI-driven general-purpose technology revolution is an industrial development backdrop without precedent in A-share history, making it a relatively fair playing field for managers of all ages, as none have experienced it before. Objectively, younger managers may be more receptive to new things and quicker to participate in AI investing.
What changes in the market ecosystem impact fund managers' research?
Wang Xianwei identifies three major changes. First, the number of A-share listed companies has expanded significantly, from about 2,800 in 2015 to over 5,500 today, making stock selection exponentially more difficult. The era of profiting simply by buying a sector is over. Second, the penetration of AI is across the entire industry chain, all scenarios, and globally, unlike past tech cycles where penetration was often partial and phased. This requires comprehensive coverage of the entire industry chain. Third, market investment preferences have converged rapidly, with only 10 of 31 sectors rising in the first half of 2026, a result of converging industry trends, earnings delivery, and sentiment. These changes demand that fund managers delve into the industrial frontlines, understand technical routes, capacity ramp-ups, and supply chain bottlenecks, and precisely forecast order visibility, earnings delivery pace, and valuation safety margins.
How do you respond to the sharp volatility of tech assets?
Wang Xianwei's approach is to use "industry trends" as the anchor of conviction, "orders and earnings" as an operational guide, and "position management" as an emotional stabilizer. He avoids trying to precisely time tops and bottoms, instead dynamically rebalancing between "core and satellite" positions to maximize long-term returns for holders. He distinguishes between "industry volatility" and "sentiment volatility." Tech stock declines can be either fundamental (fatal) or due to valuation digestion after crowded trades. He also accepts that "reasonable bubbles" are a lubricant for industrial progress. Great industry trends often involve early-stage capital and industrial bubbles, and completely avoiding them means missing out on the era's beta. The response is not to avoid all declines but to ensure a positive stance until the industry trend fully plays out.
Has fundamental analysis become ineffective?
Wang Xianwei argues that the "techniques" of traditional value investing, like static PE and PB valuation, may have failed. However, the "principles" of value investing, such as margin of safety and enterprise value, remain the only effective risk control anchors. The paradigm has shifted, not the analysis itself. The traditional margin of safety based on low PE, low PB, and high dividends relies on the liquidation value of existing assets. For tech companies, the margin of safety has shifted to the "irreversibility" of the technology roadmap and the "rigidity of positioning" in the supply chain. If a company's technology path is irreversible, even a 30% price drop is a matter of time, not value destruction. The real defense in volatility comes from segments with extremely limited supply, like advanced chip materials, where verification cycles are long and entry barriers are high, providing a clear earnings floor – a new form of moat.
What systematic upgrades are needed in investment research frameworks?
Wang Xianwei proposes a three-dimensional upgrade: shifting from "static valuation" to "dynamic lifecycle," from "single market" to "global industry mapping," and from "financial statement analysis" to "immediate supply chain verification." First, the valuation anchor should shift from PE to industry penetration rate, as traditional PE and PEG are easily distorted during rapid profit growth. Second, the research scope must move from bottom-up stock picking to a deep industry research model of cross-verification across the supply chain. Financial statements are lagging indicators; understanding upstream and downstream sentiment and global competitors provides a more immediate view. Third, the analysis of pricing power and moats should shift from high ROE to "supply rigidity." In tech hardware, high ROE often attracts massive capacity expansion, leading to price wars. The difficulty of supply expansion becomes more critical than the speed of demand growth.
What is your outlook for the market and investment opportunities?
Wang Xianwei is cautiously optimistic. Optimism stems from the certainty of the industry trend, with AI computing infrastructure clearly in a capital expenditure expansion phase through 2026-2027, a fact unchanged by short-term price fluctuations. Caution comes from changing valuations and increased market volatility. He expects the main theme to remain structural opportunities within AI computing power, but with intense internal divergence. The global AI arms race continues, driving huge demand for silicon-based infrastructure. However, capital will become very selective. He also highlights the expected diffusion of AI applications and on-device implementations. After the massive buildout of AI computing infrastructure, application explosions are likely. He watches for potential blockbuster applications or phenomenon-level AI terminal products in the second half of the year. As the capabilities of small-parameter large models improve, the explosion of AI terminal devices is a key area to watch.
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