Industrial Securities: TMT Sector Adjustment Largely Complete, Focus Shifts to AI Downstream Software Applications

Stock News11-25

Industrial Securities analyst Zhang Qiyao's team released a research report stating that the recent adjustment in the TMT sector appears largely complete based on rolling return differentials, trading volume share, crowding metrics, and historical comparisons. Since November, AI-related market trends in both China and the U.S. have begun shifting toward mid- and downstream segments, driven by evolving industry narratives and global AI application advancements.

Key observations from Industrial Securities include:

1. **TMT Sector Adjustment Largely Complete** - **Rolling Return Differentials**: After October's volatility, TMT's excess returns relative to the broader market have significantly narrowed, with 40-day rolling return differentials approaching historical lows. The metric recently bottomed near -7.5%, comparable to previous adjustments in 2023. - **Trading Volume Share**: TMT's trading volume share, a key crowding indicator, fell from over 40% to around 28%, aligning with past adjustment periods. - **Crowding Metrics**: Most AI subsectors now show crowding levels near historical lows, suggesting reduced speculative pressure. - **Historical Context**: The current 35-day, 13.7% drawdown resembles typical "moderate" corrections triggered by crowding or profit-taking, unlike prolonged downturns tied to macroeconomic risks.

2. **AI Momentum Shifting Mid- and Downstream** Since November, AI themes in both markets have expanded beyond hardware to software and applications, fueled by: - **Industry Narrative Shift**: Focus has moved from "AI hype" to tangible commercialization, exemplified by Alibaba's Qwen App launch and Google's Gemini 3 multimodal upgrades accelerating AI adoption in content creation, marketing, and e-commerce. - **Supportive Trading Environment**: Year-end market dynamics favoring expectation-driven narratives further benefit mid/downstream AI plays like software services (AIGC, AI agents) and applications (gaming, media).

Notably, post-Qwen App's November 17 debut, outperforming AI segments have concentrated in mid/downstream areas, signaling sustained momentum.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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