Technology stocks finally staged a strong comeback today, bringing a wave of relief to investors. The broader market showed mixed performance, with main board indices muted while the tech-heavy ChiNext surged higher.
By the close of trading, the Shanghai Composite Index edged up 0.07%, the Shenzhen Component Index advanced 1.91%, and the ChiNext Index jumped 3.41%. Market breadth was positive, with 3,167 stocks advancing and 95 hitting the daily limit up, while 2,196 stocks declined.
Why the tech rally?
Computing hardware stocks led the charge, with PCB and CPO sectors surging and multiple stocks hitting their daily limit. Zhongji Innolight Co Ltd shares skyrocketed over 10%, prompting humorous commentary from investors who joked that the A-share market has "returned to the light" 鈥?a pun referencing optical communication technology.
Adding to the momentum, Goldman Sachs initiated coverage on Zhongji Innolight H-shares with a Buy rating and a target price of HK$3,267. The investment bank projects the company's revenue will achieve a compound annual growth rate of 78% from 2026 to 2028, driven by growth in silicon photonics optical module shipments and the company's expansion from scale-out into scale-up and scale-across markets. Goldman's net profit forecasts for 2026 and 2027 are 25% and 42% higher than market consensus, respectively. The firm also expects gross margins to improve from 42% in 2025 to 50% by 2028, with net profit growing at an 84% CAGR between 2026 and 2028.
Agricultural stocks also remained active, with Yasheng Group hitting its third consecutive daily limit, while Dunhuang Seed, Kingenta, and Hong Sifang also hit their daily limits. Consumer-related stocks in retail and tourism sectors gained ground, with Zhongbai Holdings, Guofang Group, Baida Group, and Xinhua Department Store among those hitting limit up.
AI chip stocks under pressure
On the downside, AI chip stocks weakened significantly. Moore Threads hit the 20% daily limit down, while Muxi shares fell nearly 10%. The decline in Moore Threads came as the company faced a lock-up expiry on September 7, releasing 25.77 million restricted shares, which expanded its tradable float by nearly 85% and triggered technical selling. The company responded that the volatility mainly stemmed from the increased float and urged investors to "handle rationally" the share price changes resulting from the lock-up expiry. A larger lock-up expiry in December, representing approximately 39.55% of total share capital, could continue to exert supply-side pressure on the stock in the near term.
What drove the tech rebound?
The rally in technology stocks follows gains in US tech shares on Friday, with Asian markets tracking higher on Monday and tech leading the advance. The MSCI Asia-Pacific Index climbed 1.4%, with Korean chipmakers SK Hynix and Samsung Electronics contributing the most to the index's gains. On Wall Street, the Nasdaq 100 rose 0.2% on Friday, while the Philadelphia Semiconductor Index surged 3.4%.
Market participants attribute the tech strength partly to investor optimism that OpenAI's new models will further stimulate AI computing demand. Kim Namho, a fund manager at Seoul-based Timefolio Investment Management, noted that the biggest factor driving Korean chip stocks higher was optimism over OpenAI's new models 鈥?a sentiment that had previously boosted US chip stocks. OpenAI last week announced its next-generation technology GPT-6, which the company views as a significant milestone in its decade-long pursuit of artificial general intelligence (AGI).
Tim Waterer, chief market analyst at KCM Trade, commented: "The renewed strength in tech stocks is keeping traders in a buying mood today. What's somewhat surprising is how quickly Asian markets have digested the negative reaction in US stocks following the jobs data."
Meanwhile, rising oil prices combined with stronger-than-expected US non-farm payrolls data have shifted market attention to the US inflation data due on Friday. That report could play a decisive role in whether the Federal Reserve raises interest rates this month. Analysts suggest that if CPI comes in hot, it would essentially lock in a September rate hike and support further dollar strength. Conversely, a cooler inflation reading would reinforce the case for the Fed to hold rates steady, while putting downward pressure on the dollar as markets reprice a more dovish Fed stance.
This article is for reference only and does not constitute investment advice. Investors should operate at their own risk.
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