In recent weekly reports titled "Beyond Light, What Else?" and "AI: If Not the Summit, Where Are the Valleys?", we emphasized that the window for intensive catalysts from global tech earnings and industry trends will persist. The focal points of U.S.-China market resonance remain within the technology sector. Following signs of structural overheating in certain segments, domestically produced computing power—which we highlighted across multiple dimensions—has emerged as a core theme in the pre-holiday AI rally.
During the holiday period, the strong performance of U.S. tech stocks following earnings releases continued to be a global equity market highlight. How will A-shares react post-holiday? After the completion of domestic first-quarter earnings disclosures, what clues will emerge for market diffusion?
I. U.S. Tech Stocks Shine Globally During the Holiday Over the holiday, U.S. tech stocks stood out globally after major companies reported earnings. During the Labor Day holiday (May 1–4), Federal Reserve Chair Powell's hawkish stance delayed rate-cut expectations, while March PCE data fueled inflation concerns, pushing up the U.S. dollar and Treasury yields. Meanwhile, fluctuating Middle East tensions drove oil prices higher and precious metals lower. Global equity markets were mixed, but U.S. tech stocks led the way, with tech-heavy markets like South Korea, Taiwan, and Hong Kong outperforming.
Two key drivers supported this trend: expanding capital expenditure by North American cloud providers and better-than-expected earnings from global memory leaders. Major North American CSP firms have collectively raised their 2026 capital expenditure guidance, reflecting sustained high demand for computing power amid ongoing competition. This boosts demand for global AI hardware suppliers. Additionally, following strong results from memory leader SK Hynix, other giants like SanDisk, Seagate, and Micron also reported impressive earnings, confirming a super-cycle in AI-driven memory demand and lifting sentiment toward related segments like wafer foundries.
Looking ahead, the window for tech earnings and industry catalysts remains open, suggesting continued global focus on technology. May brings more earnings from U.S. tech giants in CPUs, optical modules, and IDC, with NVIDIA's results on May 20 being a key event. Further confirmation of tech sector strength is expected through additional earnings reports, supporting sustained global tech momentum.
Moreover, May and June mark a critical period for overseas tech influences, with major industry events like WWDC, COMPUTEX, and Google I/O. Seasonal trends show the Philadelphia Semiconductor Index often outperforms during this period, which may positively impact A-share tech sectors.
II. Post-Holiday A-Share Market Outlook For A-shares, the strong holiday performance of U.S. tech stocks, combined with solid Q1 earnings confirming high growth trends, suggests that domestic AI hardware chains—such as optical communication and memory—closely tied to global AI trends will lead post-holiday market performance.
Throughout May, favorable external conditions—including global tech momentum, easing geopolitical concerns, and potential diplomatic engagements—support a conducive environment for growth-oriented tech allocations. While overcrowding in certain segments has raised concerns, we view this as "structural overheating" rather than a major constraint on the broader tech rally.
However, as some sectors show early signs of overheating, crowding may influence internal sector rotations. Moving forward, with Q1 earnings providing growth clues and a dense catalyst window approaching, the focus should shift toward segments with lower crowding and better value, guided by earnings and industry trends.
First, crowding is largely structural, with only a few sub-sectors at elevated levels, leaving room for broader market diffusion. Most sectors remain moderately or lowly crowded, supporting continued market expansion.
Second, institutional surveys indicate that industry trends are regaining prominence as a key market driver, with growing consensus on growth-style leadership. According to a late-April survey of over 180 domestic institutional investors, 57% prioritized industry trends in April, up from 7% in March, while optimism around diplomatic engagements also gained attention. Growth-style preferences strengthened significantly (from 16% to 48%).
Additionally, as China enters a seasonal economic lull in May and June, catalysts are likely to favor tech sectors with strong industry narratives. After a strong Q1 and seasonal peaks, macroeconomic support for cyclical sectors may wane, shifting focus toward U.S.-China tech synergies.
Finally, Q1 earnings confirm that high growth remains concentrated in AI- and export-driven TMT and midstream manufacturing sectors. Until new macro narratives emerge, market consensus may stay focused on these areas.
Within the tech growth sphere, after significant gains in North American computing chains, expectations have shifted toward consolidation, with increasing interest in domestic computing and advanced manufacturing. Nearly 60% of institutional investors expect North American computing chains to enter a period of high volatility, ranking them only third among preferred themes. Instead, diffusion into domestic computing and advanced manufacturing is gaining traction.
Thus, for May, as market focus returns to industry trends amid a seasonal domestic lull and key overseas tech catalysts, tech growth tied to U.S.-China synergies should remain in spotlight. Crowding is not a primary constraint; instead, validation of industry progress is key. Structurally, rotation into less-crowded segments within tech may offer more sustainable gains.
Diffusion should follow two themes: AI and global exports. On one hand, as U.S.-China tech trends align, AI-related opportunities should broaden. On the other, China's manufacturing export competitiveness is strengthening amid global supply chain shifts, supported by energy independence, resilient supply chains, and enhanced pricing power. This may become a macro highlight for the year, warranting attention to export-oriented tech segments.
III. AI and Exports: Where to Diffuse? (A) AI: Focus on Domestic Computing & AI Data Center Support Chains; Watch Satellite Sector Catalysts Domestic computing and AI data center infrastructure remain high-consensus diffusion targets. Several domestic chip leaders have reached inflection points in earnings, benefiting from AI trends and showing catch-up potential relative to North American peers. Market consensus strongly favors upstream segments like domestic computing and data center support chains over mid- and downstream software applications.
Based on performance and Q1 profit growth, focus on diffusion within semiconductor chains (packaging, materials, equipment, GPUs) and AI data center infrastructure (power grids, computing leasing).
Midstream segments like computer services are showing improved margins, driven by AI adoption. Areas like office software, security, cloud services, and cybersecurity may offer greater upside as tech diffusion continues.
Event-wise, May brings a catalyst-rich period for commercial space, with SpaceX's IPO plans and domestic reusable rocket launches, highlighting satellite communication value chains.
(B) Exports: Focus on Supply Chain Restructuring, Energy Security, AI-Driven New Energy Demand, Equipment, and Cultural/Technology Exports A-share listed firms are accelerating overseas revenue growth, with overseas sales proportion rising to 16.9% in 2025 from 14.8%, and overseas gross margins reaching 27.63%, exceeding overall margins of 23.31%. Global competitiveness and pricing power are strengthening.
Post-global supply chain disruptions, China's export advantages are evident across three dimensions: energy diversity and security mitigating cost pressures; resilient, comprehensive supply chains replacing high-energy-dependent exporters; and rising pricing power in midstream manufacturing.
Screening export chain diffusion targets based on overseas demand, margins, and profit growth suggests opportunities in supply chain restructuring (machinery, vehicles, agrochemicals, chemicals), energy security and AI-driven new energy (batteries, storage, grids, motors), AI equipment exports (turbines, PCB equipment, automation), and cultural/technology exports (gaming, biopharma).
Risks include economic data volatility, slower policy easing, delayed Fed rate cuts, and geopolitical escalation.
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