Investors are advised to consult professional analyst reports for authoritative, timely, and comprehensive insights to uncover potential thematic opportunities. A decline that took two months for some stocks has been mirrored in just five days for technology shares.
Since July 1st, the previously robust technology sector has entered a phase of adjustment, with popular segments like semiconductors, optical communications, PCBs (printed circuit boards), and memory witnessing significant pullbacks across individual stocks.
This correction is not unique to the A-share market. From South Korea to the United States, the global technology sector is under simultaneous pressure. In Hong Kong, PCB leader Kingboard Holdings Ltd (HKEX: 00148) has nearly halved from its June peak. South Korea's memory giants, Samsung Electronics Co., Ltd. and SK Hynix Inc., have both retreated over 25%. In the US, the Philadelphia Semiconductor Index has corrected by nearly 20%. Following the collective surge in May and June, global tech stocks are broadly facing a need for valuation digestion after reaching excessively high trading concentration levels.
As of the close on July 8th, several high-profile A-share stocks have fallen more than 25% within just a few trading sessions. Among them, optical fiber leader Hengtong Optic-Electric Co., Ltd. (SHSE: 600487) has retreated 32.2%. MLCC-related stocks Yunzhong Science and Technology Co., Ltd. (SHSE: 688260) and Torch Electron Co., Ltd. (SHSE: 603678) have both fallen over 30%. Memory leader GigaDevice Semiconductor (Beijing) Inc. (SHSE: 603986) is down 30.4% from its historical high. As some investors quipped, "A two-month decline for established stocks has been completed in five days for the new favorites."
After the extreme rally in June, a temporary market style rebalancing is inevitable. As mid-year performance forecasts and financial reports are gradually disclosed, actual earnings will become the watershed for the subsequent tech sector performance.
Popular AI Tech Stocks See Widespread Retreats Near 30%
On July 8th, the A-share market continued its divergent pattern, with previously strong tech sectors becoming the hardest hit. By the close, the Wind MLCC Index plunged 4.14%, the Semiconductor Materials Index fell 3.64%, the PCB Index dropped 3.46%, and the Optical Communications Index declined 0.7%. At the individual stock level, National Silicon Industry Group Co., Ltd. (SHSE: 688126) fell over 10%, while Yunnan Chihong Zinc & Germanium Co., Ltd. (SZSE: 002428) and Torch Electron were among the tech stocks that hit the daily downside limit.
Looking over a longer timeframe, since peaking around June 30th, this round of tech stock pullbacks shows a clear characteristic: the greater the gains from April to June, the deeper the retreat since July. This reflects the market rebalancing positions in the previously overcrowded tech sector, with profit-taking being the main driver of the adjustment.
Data analysis reveals that sectors that saw larger gains earlier, such as optical communications, fiber optics, PCBs, electronic fabric, MLCCs, and memory, have become the core areas of this adjustment, with many industry leaders retreating over 25%.
Image Caption: Top 20 Tech Stocks by Pullback Magnitude (Compiled by First Financial)
The optical communications and fiber optics sectors have been the hardest hit in this round. Hengtong Optic-Electric has cumulatively retreated 32.2% since June 30th. The stock had surged 108.7% from April to June, meaning nearly one-third of its doubling gains were erased in just five trading days. Yongding Co., Ltd. (SHSE: 600106) and Hangzhou Cable Co., Ltd. (SHSE: 603618) both retreated over 29%, with Yongding posting a staggering 143.3% gain in Q2. Additionally, popular fiber stocks like FiberHome Telecommunication Technologies Co., Ltd. (SHSE: 600498), Yangtze Optical Fibre and Cable Joint Stock Limited Company (SHSE: 601869), and Zhongtian Technology Co., Ltd. (SHSE: 600522) have all corrected more than 25%.
The optical module sector also saw notable adjustments, with the popular "Yi-Zhong-Tian" combination broadly retreating. From its historical peak in mid-to-late June, Tianfu Communication Co., Ltd. (SZSE: 300394) saw the largest pullback, around 38%. Zhongji Innolight Co., Ltd. (SZSE: 300308) retreated about 25% from its June 22nd peak. In terms of prior gains, Zhongji Innolight rose 123.3% cumulatively from April to June, while Shenzhen Fastprint Circuit Tech Co., Ltd. (SZSE: 300502) gained over 90%, and has now pulled back 20.8% from its high. This adjustment is essentially a correction of the previous overly rapid ascent.
The semiconductor and memory sectors also experienced significant retreats. In semiconductor materials, Shengyi Technology Co., Ltd. (SHSE: 688233) fell 29.2% after a massive 219.22% surge in Q2. Two semiconductor silicon wafer firms, Lion Microelectronics Co., Ltd. (SHSE: 603358) and National Silicon Industry Group, both saw their shares double in Q2, and have now retreated 30.4% and 25.9%, respectively.
The overall adjustment in the memory sector is close to the 20%-30% range. Leader GigaDevice Semiconductor fell from 846.66 yuan to 603.17 yuan, a maximum pullback of 30.43%, following a 243.37% surge in Q2. Other memory stocks like Montage Technology Co., Ltd. (SHSE: 688008), Longsys Electronics Co., Ltd. (SZSE: 301308), and BIWIN Storage Technology Co., Ltd. (SHSE: 688525) retreated in sync.
The valuations of the PCB and electronic fabric sectors soared throughout Q2, and their subsequent retreat cannot be ignored. Data shows that upstream PCB materials, which saw larger gains in Q2, experienced deeper pullbacks, while PCB manufacturers saw relatively milder retreats, largely corresponding to the prior divergence in gains.
In electronic fabric, China Jushi Co., Ltd. (SHSE: 600176) retreated 27.2%; 47-bagger Honghe Technology Co., Ltd. (SHSE: 603256) and 17-bagger Chongqing Polycomp International Corp. both fell over 26%. These three star stocks in the electronic fabric sector had surged 202.16%, 279.15%, and 314.3% respectively in Q2.
In the copper-clad laminate (CCL) field, Jin'an Guojie Co., Ltd. (SZSE: 002636) retreated 24.7%, and Shengyi Technology Co., Ltd. (SHSE: 600183) fell 18.4%, after rising 299.5% and 224.9% respectively from April to June. Among PCB manufacturers, leaders Wus Printed Circuit (Kunshan) Co., Ltd. (SZSE: 002463) and Shennan Circuits Co., Ltd. (SZSE: 002916) retreated over 17%.
The MLCC and passive components sector also saw deep corrections. Yunzhong Science and Technology retreated 38.8% since June 30th, following a 4.53-fold surge in Q2, making it one of the biggest gainers in the entire tech sector. Torch Electron fell 31.7% after a 144.84% gain from April to June. Stocks like Sunlord Electronics Co., Ltd. (SZSE: 002138), Sanhuan Group Co., Ltd. (SZSE: 300408), and Fenghua Advanced Technology Holding Co., Ltd. (SZSE: 000636), which doubled in Q2, all retreated over 26%.
Global Tech Sell-Off: Hong Kong, South Korean, and US Markets Follow Suit
The tech stock adjustment is not an isolated A-share phenomenon. Tech favorites in Hong Kong, South Korea, and the US markets have also recently seen significant pullbacks. Following the substantial gains in May and June, the global semiconductor, memory, and optical communication supply chains are broadly facing valuation digestion needs after reaching excessively high trading concentration.
In the Hong Kong market, PCB industry chain leader Kingboard Holdings has become a bellwether for this adjustment. At the time of writing, Kingboard Holdings was down 14% at HKD 72.65 per share, nearly halving from its June 22nd high of HKD 151.8, a retreat exceeding 50%. By the close on the 8th, Kingboard Laminates Holdings Ltd (HKEX: 01888) closed down 4.64%, with a maximum pullback of about 39.8% from its June 25th historical high.
On the news front, Hallgain Management, linked to the major shareholder family of Kingboard Holdings, cumulatively reduced its stake in Kingboard Holdings over three trading days from July 2nd to 6th, involving approximately HKD 25.6 billion, lowering its holding from 34.3% to 31.98%. This substantial reduction by a major shareholder further heightened market concerns about profit-taking at elevated tech stock levels.
In the South Korean market, the memory chip giants retreated in sync and depth. Samsung Electronics has pulled back about 27% from its June 19th peak, while SK Hynix retreated 31.5% from its June 25th high. Previously benefiting from expectations of AI server demand explosion and rising memory chip prices, Samsung's shares doubled in Q2 this year, and SK Hynix surged 228.4%.
However, with short-term gains becoming excessive and coupled with rising concerns about demand sustainability, the memory sector entered an adjustment phase. The US market was not spared either. The Philadelphia Semiconductor Index has seen a maximum pullback of 18.4% since June 22nd, following an 87.8% surge in Q2.
At the individual stock level, Micron Technology, Inc. retreated about 29%, SanDisk (now part of Western Digital) fell nearly 37%, and Coherent Corp. (formerly II-VI) retreated 31%, all significantly underperforming the sector average. Additionally, AI chip leaders like NVIDIA Corporation and Advanced Micro Devices, Inc. (AMD) saw varying degrees of pullback, presenting a broad-based decline across the semiconductor industry chain.
From a global perspective, this round of tech stock adjustment shows clear coordinated characteristics. Between May and June, driven by multiple industry narratives such as accelerated AI infrastructure build-out, the upcycle in memory chips, and explosive demand for advanced packaging, global tech stocks generally experienced a rapid rally. Semiconductor-related sectors in A-shares, Hong Kong, South Korea, and the US broadly gained over 50%, with some individual stocks surging more than 200%. Excessive short-term gains led to a rapid climb in trading concentration. Once market sentiment shows marginal changes, concentrated profit-taking can easily trigger a swift correction.
Crowding Remains; Future Tech Performance Hinges on Earnings and Industry Narrative
After this rapid adjustment, trading concentration in the tech sector has receded somewhat but remains some distance from healthy levels. A Shanxi Securities research report pointed out that as of July 3rd, while the current tech sector crowding had fallen from a mid-week high of 58.84% to 49.71%, it had not yet returned to a healthy zone below 40%, indicating that position reshuffling in highly concentrated sectors is not yet complete.
Regarding the future trajectory of tech stocks, the market generally believes two key signals need close monitoring. First is the performance realization during the mid-year earnings forecast period. If the proportion of tech companies missing expectations exceeds forecasts, it could trigger a second wave of compensatory declines. Second is whether liquidity will further contract due to factors like the macro environment, which would further release the risk of stampedes in highly crowded sectors.
A private equity fund investment head interviewed stated that as the US Federal Reserve has not yet entered a rate-cutting phase, there is still room for the AI tech stock theme to play out. Earnings are the key variable for AI tech stock movements at present. Referring to the dot-com bubble era, sustaining the theme requires accelerating景气度 (prosperity/activity). With North America's top four cloud providers projected to have combined annual capital expenditures exceeding $650 billion by 2026, AI infrastructure demand remains in an explosive stage, providing some support on the earnings front.
The same private fund source also noted that temporary market style rebalancing is difficult to avoid. Currently, the spread between the average performance of the top three and bottom three Shenwan primary industries over the past half-year is接近接近接近接近接近 (approaching) +3 standard deviation levels, indicating some impetus for style rebalancing. Some funds concentrated in the STAR and ChiNext markets may be positioning for two potential catalysts: mid-July mid-year earnings forecasts and the potential listing of a major domestic memory tech giant. By mid-to-late July, it will be necessary to observe whether a "sell-the-news" logic emerges, which could then impact the AI tech style.
From an industry fundamental perspective, the overarching trend of AI computing demand has not changed. Global cloud provider capital expenditures continue to rise, and order visibility remains relatively high for segments like optical modules, memory chips, and advanced packaging. However, after the rapid gains in May and June, stock prices have largely reflected optimistic expectations. The advancement of the subsequent行情 (market trend) will require solid earnings data for verification.
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