Broad strategy directly hits the market "irreconcilable differences": is the high PB of technology stocks a bubble or pricing power? The lesson of the 1990s technology bubble.

GF Securities released a research report stating that by 2026, the A-share market will see extreme pricing based on the prosperity, characterized by: high growth rates for high valuations, high growth rates for high valuations, and high growth rates for low dividends. Prosperity indicators such as revenue/profit growth rates, ROIC/ROE/gross margin change rates are effective, with companies ranking in the top 10% for revenue growth and non-deduction growth in the first quarter of 2026 seeing an average increase of over 40%. On the other hand, indicators such as cash flow, dividend yield, and valuation are ineffective, showing even a negative correlation, where companies with good cash flow, high dividends, and low valuation actually experience more declines. The current valuation disparity between AI and non-AI, as well as the disparity between technology industry and traditional industry, has reached historical highs. Does this necessarily lead to valuation convergence, or even a market downturn? Objectively, using industry PB historical percentile standard deviation or the difference between maximum and minimum values to measure industry valuation differentiation, they have reached historical highs. The extreme valuation disparity is not necessarily a condition for a market downturn. GF Securities' main points are as follows: In October of last year, with the further innovation and application of the AI industry, the stock prices of A-share and Hong Kong-listed companies in the AI industry chain saw significant increases, with the market value of some key companies doubling around August of last year. As of September of the 25th year, conflicting voices continued to increase, from initial doubts about the valuation and market value of AI industry chain companies, to debates on the technical details of AI, and even escalated to debates on investment paradigms and investment philosophies. Some views regard the rapid and ahead-of-time rise in stock prices during technological advancement and industrial revolution as speculative original sin under the prosperity investment model, pushing prosperity investment in opposition to long-term value investment. With the further increase in tech stock prices in the first half of the 26th year, these divergences, especially regarding the valuation of tech stocks, seem to have become an irreconcilable contradiction in the market. The valuation of tech assets has always been a major challenge for investors in each tech bull market. During the prosperity stage, tech stocks, especially some manufacturing companies, have PB valuations reaching as high as 10 times, 30 times, or even higher, not only in A-shares but also in US stocks. For example, the overall PB of the US tech sector has now exceeded 13 times (corresponding to an ROE of 30%+), while the historical PB median was only around 4 times (corresponding to an ROE of 20%+). Therefore, how to understand the valuation of tech stocks, how to discern market controversies calmly, and how to respond to the extreme disparity in valuation, are important questions to answer. Overall, the valuation discussion is based on the investment term; if the starting points are different, the arguments are meaningless. The key to valuation judgment lies in the marginal changes in prosperity (change in ROE or growth rate). Fast growth or an uptrend in ROE generally leads to an increase in valuation, while a slowdown in growth or a downtrend in ROE leads to a decrease in valuation, easily falling into a "low valuation trap."