Shenwan Hongyuan Group: The major wave of upward momentum in the AI industry chain is still in need of time to restart; attention should be paid to rotation opportunities in non-tech directions.

Shenwan Hongyuan Group has released a research report stating that a substantial rebound in the AI industry chain still requires time, and in the near term, investors should continue to focus on investment opportunities in non-tech sectors. The overall adjustment space in the market is already limited (the reinforcement of stable and long-term policies is expected), and the tech sector still needs time to consolidate. In this scenario, high-dividend assets (weighted by the CSI 800 the holding weight of public funds in Q2 2026) may lead the way in returning to a strong mid-term status among non-tech assets, with a focus on banks, non-bank financials, food and beverages, and utilities. Based on fundamental highlights, investment opportunities in non-tech sectors should include medicine and biology, industrial metals, and basic chemicals. 1. The AI industry chain needs to proceed cautiously for a strong recovery; a reversal in the market is unlikely to happen overnight. Shenwan Hongyuan Group identifies four key points: 1. A short-term rebound after excessive declines indicates that the effectiveness of fundamental research is beginning to recover, and a secondary bottom may follow. 2. Even with a secondary bottom, it is reasonable for stable and long-term policies to make a renewed impact, accelerating the clearance of pessimistic positions. 3. The efficiency of performance in digesting valuations is higher than that of adjustments; during the third-quarter reporting period, static valuation digestion combined with valuation rotation is expected to push valuations closer to historical medians. 4. A strong recovery in the AI industry chain ultimately requires significant catalysts to forge a new consensus. Shenwan Hongyuan Group still believes that a substantial uptrend in A-shares and a strong rebound in AI industry trends are necessary conditions for a recovery. However, the market reversal will not happen quickly and will require key points to be broken through gradually. Shenwan Hongyuan Group identifies four key points: 1. The positive significance of the short-term rebound lies in the preliminary recovery of effectiveness in bottom-up research, corresponding to an initial stabilization in market sentiment. Yet, this rebound still falls under the category of a dead cat bounce, and a secondary bottom may still occur. The core issue is the rapid adjustment of the market earlier, resulting in quick transitions of holding gains from positive to negative, leading to suppressed portfolio adjustments. This pressure may be released when the market rebounds, bringing holding gains back to the breakeven point. 2. Even with a secondary bottom, the rebalancing of stable and long-term policies is expected. If realized, this could provide a window for accelerating the clearance of pessimistic holdings in the ChiNext and STAR Market. After this, the inherent stability of the tech sector may further recover. 3. Referring to the principle of two segments in a substantial upward trend, the adjustments between the two stages of the market may bring the static valuations of leading assets back from extremely high historical valuations to historical median levels. For AI industry assets, the efficiency of performance in digesting valuations exceeds that of adjustments. For leading companies in AI computing power, the Q4 2026 report may mark a point where static valuations approach historical medians, while the performance digestion from Q3 2026 reports may show initial results. Simultaneously, the release of these Q3 reports will mark a transition in performance anchors toward 2027. Following October, the market may systematically reflect positive catalysts for AI computing power chains. 4. The restart of the substantial upward trend and the resurgence of the AI industry chain ultimately requires significant industrial catalysts to initiate a new stage in the AI industry trend. However, specific industrial clues remain unclear at this moment, making precise market timing difficult. At this stage, the recovery of the AI industry chain has just reached its first key point. It is advisable to first manage the rebound from excessive declines. The mid-term layout should not be rushed, as we should wait for key stages to break through one by one, proceeding cautiously. 2. Reaffirming the discussion on short-term supply and demand contradictions: 1. The capital cycle in Q2 26 is difficult to recover in the short term: In Q2 26, public equity funds concentrated on high-sharp products, while fixed income + capital concentrated on low-volatility + high-yield products. Among them, equity investment also reflects a virtuous cycle in multiple tech sectors. Short-term floating profits in holdings have quickly turned negative, and the clearance of pessimistic holdings remains insufficient. 2. During the upward phase, marginal funds lead the market, enabling significant effects with minimal inputs; however, in the adjustment phase, follow-up funds can also be a major source of selling pressure. The mid-term market remains dominated by supply and demand, reaffirming the current contradiction: 1. In May and June, public equity funds concentrated on high-sharp, labeled, and quasi-passive products. The incremental funds in public equity during Q2 26 are limited and extremely polarized internally. Investment in single-sector tech and multi-sector products is seeing inflows, while non-tech sector products are seeing outflows. Within the tech sector, incremental funds are concentrated in products that rank in the top 20% by net value sharpness. 2. Fixed income + equity investment also shows a trend toward the tech sector. In Q2 26, incremental funds in fixed income + concentrated on two types of products: low-equity-position non-sector fixed income + (to enhance yields) and moderately positioned tech multi-sector fixed income products. The marketing of tech multi-sector fixed income + is based on low volatility + low drawdown, while re-marketing high yields. While tech sectors naturally demonstrate low volatility and high yields, adjustments in July saw a significant decrease in yield and pronounced drawdown. Currently, the floating losses are high in the electronics and communications sectors, with short-term redemptions and selling pressure being suppressed. Future rebounds from excessive declines still carry significant pressure for clearing pessimistic holdings. 3. During the upward phase, supply and demand analysis focused on marginal funds, where marginal funds lead other follow-up funds, achieving substantial effects with minimal inputs, determining market strong style and structure. Conversely, during the adjustment phase, selling pressure is not limited to funds leading market climbs; all follow-up funds are potential sources of selling pressure. At the same time, in the adjustment phase, the marginal funds have also changed, with allocation funds enhancing the stability and long-term forces of the market, which augment the marginal influence. This is also why overall adjustments tend to favor non-tech sectors. A return to an aggressive market state akin to May and June requires first addressing floating losses in holdings and clearing pessimistic positions. On this basis, further positive factors need to accumulate. Thus, a resurgence in the AI industry chain will inevitably be a mid-term process. 3. A substantial rebound in the AI industry chain still requires time, and in the near term, it is essential to keep focusing on investment opportunities in non-tech sectors. The overall adjustment space in the market is limited (the reinforcement of stable and long-term policies is necessary), and the tech sector still needs time to consolidate. In this combination, high-dividend assets (weighted by the CSI 800 the holding weight of public funds in Q2 26) may lead the way in returning to a robust mid-term status among non-tech assets, with a particular focus on banks, non-bank financials, food and beverages, and utilities. Based on fundamental highlights, investment opportunities in non-tech sectors should include medicine and biology, industrial metals, and base chemicals. As the substantial uptrend continues, it is highly likely that tech will lead the way, but the market will naturally exhibit more diversity: internally, there will be greater variety within tech sectors, and opportunities in domestic AI chains are equally abundant. Overall, the market will also reflect greater diversity, with tech leading and other non-tech sectors with signs of improving prosperity also offering absolute returns.