To The Moon

The three major A-share indices all closed higher today. As of the close, the Shanghai Composite Index rose 0.46%, the Shenzhen Component Index gained 1.32%, the ChiNext Index surged 3.11%, the Beijing Stock Exchange 50 rose 2.3%, and the STAR 50 Index climbed 2.8%.

Total market turnover reached 1.6887 trillion yuan, an increase of 171.9 billion yuan from the previous trading day, with more than 3,500 individual stocks advancing across the market.

In terms of sector themes, components, CPO, optical fiber concepts, PCB concepts, gaming, and semiconductor sectors led the gains, while liquor, airport shipping, dairy, pork, and duty-free store sectors lagged behind.

On the trading floor, the components sector continued to climb in the afternoon, with Dongshan Precision, Shennan Circuits, Wus Printed Circuit, Jingwang Electronics, and Aoshikang hitting the daily limit, while Nanya New Material, Victory Giant Technology, and Shengyi Electronics posted strong gains.

The CPO sector surged significantly in the afternoon, with more than ten stocks including Yuanjie Technology, YOFC, Cambridge Technology, Huashengchang, and Accelink Technologies touching the daily limit, while Eoptolink, Zhongji Innolight, and T&S Communications all rose more than 10%.

The semiconductor sector also performed actively, with Liyang Chip hitting the 20cm daily limit, while JG Technology, Enflame Technology, and Cambricon led the gains.

The liquor sector remained sluggish throughout the day, with Huangtai Liquor, Jinshiyuan, and Gujing Gongjiu among the biggest decliners.

Despite bearish factors including last night's stronger-than-expected U.S. October CPI data and renewed market expectations for a Federal Reserve rate hike in December, A-shares performed reasonably well today. The market opened lower but rallied, with volume continuously expanding in the afternoon, indicating that off-market funds were buying in gradually. More than 3,500 stocks closed in positive territory, creating a strong wealth effect.

Notably, the most eye-catching performance today came from the AI hardware direction represented by optical modules, which not only triggered a large wave of daily-limit gains but also saw large-cap companies achieving gains of around 15%. The reasons behind this can be summarized as follows:

First, the most direct trigger came from reports regarding the optical module direction. However, sentiment recovery alone is insufficient to explain the synchronized volume expansion in PCB, copper-clad laminate, and other segments.

Verification signals from the industrial side are reinforcing this logic. Some institutions pointed out that demand for AI servers and high-speed interconnect is driving volume growth in high-layer boards, advanced HDI, and low-loss materials, with both PCB usage per cabinet and value per unit increasing, while leading manufacturers maintain high utilization rates on premium capacity. Feedback from the supply chain confirms this: existing production lines for HDI and high-multilayer PCBs are fully booked, with some companies' order volumes already exceeding their capacity ceilings.

Optical module leaders also stated on the same day's interactive platform that they have made adequate preparations for raw materials and capacity, with both their Chengdu and Thailand factories expanding production, strong customer demand, and normal order delivery. These are not long-term narratives but variables already reflected in orders and capacity utilization rates.

Additionally, domestic policy provided a third layer of incremental narrative on the same day. The "Beijing Embodied Intelligence Robot Industry High-Quality Development Action Plan (2026-2028)" was issued, explicitly proposing the construction of new embodied intelligence dedicated computing power clusters with a total scale exceeding 50,000 PFlops. This adds a domestic incremental source to the demand side of computing infrastructure, making the demand logic for AI hardware no longer solely dependent on the capex pace of overseas cloud providers.

In summary, today's rally structure can be understood as a combination of three layers of logic: the marginal easing of optical module trade ban risks, the continuous verification of industry prosperity through trading in PCB and other segments, and the implementation of domestic demand increments through computing power policy trading. Together, these three factors drove capital concentration toward the AI hardware direction.

However, it is important to distinguish that risk repair can explain a single day's gains, while industry trends determine how far the recovery can go. The ban has not been formally withdrawn, and supply chain risks for optical modules have not been eliminated; the simultaneous rise in PCB volume and price is already supported by orders, making its logic more solid.

The core observation points going forward are not whether sentiment can continue, but whether the policy variables surrounding optical modules converge in a predictable direction, and whether the high-end capacity utilization rate of PCBs can be maintained during the expansion cycle. The former determines the ceiling for valuations, while the latter determines the floor for profitability.

Looking ahead, we believe that current A-share opportunities outweigh risks, and investors can afford to be somewhat optimistic. The key observation point going forward mainly lies in whether trading volume can continue to expand and remain above the 2 trillion yuan level. If so, the sustainability of the market rebound will be assured; if trading volume shrinks again, it would indicate that the market may need further consolidation. As for allocation direction, it is recommended to maintain reasonable positioning around the AI industry chain, consumption, pharmaceuticals, large financials, and AI applications sectors.

[Note: Markets carry risks, and investment requires caution. Under no circumstances do the information or opinions expressed in this subscription account constitute investment advice for anyone.]