China Securities Co., Ltd.: AI sector volatility intensified, medium to long-term economic fundamentals remain unchanged.

China Securities Co., Ltd. released a research report stating that the volatility of the AI sector has significantly increased this week, but the medium to long-term industry outlook remains stable. The short-term market has entered a critical point for fund rotation. There is a possibility of a "M-shaped" upward oscillation path in the future, through a process of "clearing out floating chips -> new fund rotation", the index will regain its upward momentum after completing the chip exchange. Overall, the investment strategy continues to focus on the "computing power bull + recovery bull" dual theme. China Securities Co., Ltd.'s main points are as follows: 1. The AI sector has experienced increased volatility, but the medium to long-term industry outlook remains stable. The market sentiment has been repeatedly shaken by multiple factors. The essence of the fund grouping phenomenon lies in the continuous influx of incremental funds and the continuous validation of industry trends. Under the macro constraints of high growth scarcity, the medium to long-term industry outlook has not been refuted, and the supply and demand imbalance is likely to continue in the foreseeable future. 2. The short-term market has reached a critical point for fund rotation. Overall, the emotive interpretation of funds with high risk preferences and the positional game has become sufficient, and the subsequent marginal increments are gradually narrowing. At the same time, recent broad-based ETF funds have been continuously flowing out, but from the perspective of shares, the subsequent selling pressure may gradually weaken. The fragile micro-market liquidity structure may lead to short-term technical adjustments and oscillations in the index due to inadequate support, but this may also become a benign opportunity to optimize fund structures and solidify the foundation for upward movement. At the same time, the motivation for individual investors to re-enter the market may be increasing. Looking ahead, there is a possibility that the market will duplicate the "M-shaped" oscillation upward path. At the beginning of the year, the market was hot, but later faced temporary outflows of broad-based ETF funds and external disruptions. The index experienced consolidation and rebound in the first quarter, stabilizing funds by the end of March and rising again. At the current point in time, a similar process of "clearing out floating chips -> new fund rotation" may lead to the index regaining its upward momentum after completing the chip exchange. 3. Inflation concerns have eased, and the recovery path is under observation. With the US-Iran memorandum close to completion, international oil prices have fallen to around $90 this week, significantly improving inflation concerns. Global demand is expected to boost, and the market performance of the domestic demand sector may be more sustainable and resilient. The year-on-year peak of the PPI does not mean the end of the market immediately. If subsequent macroeconomic data can confirm sufficient momentum for domestic demand recovery, the market style may spread from "upstream solo" to midstream and downstream sectors. Overall, we continue to focus on the investment strategy of "prosperity as the core" proposed in our medium-term strategic outlook "Driving dual bull markets, index reaching new highs". We continue to focus on the dual themes of "computing power bull + recovery bull". Computing power bull: positioning in the segment with the best quarterly performance, benefiting more from ties to the NVIDIA industrial chain. Recovery bull: The US-Iran negotiations are expected to achieve phased results, and lower oil prices are beneficial for the non-ferrous metal sector, while new energy benefits from the continued high prosperity of global energy transformation.