Sinolink: How should we view the recent divergence between Chinese and U.S. tech stocks?

Sinolink released a research report stating that the recent divergence between Chinese and U.S. tech stocks is a manifestation of the global tech stock narrowing, driven by the redistribution of profits in the global AI industry chain that has suppressed valuations of non-U.S. tech stocks, accompanied by the still-crowded trading structure in A-shares. Looking ahead, with AI investment uncertainty still present and rate hike expectations easing, from a global investment perspective, holding a combination of U.S. AI tech stocks plus gold could be a hedging portfolio. However, for domestic investors, A-share tech stocks do not hold an advantage in the tech narrowing process. Domestic demand is also a potential hedging area, but weak reality constrains the sustainability of stock price performance. Going forward, a comprehensive defensive approach is still needed, with energy plus gold being a relatively advantageous combination for A-share investors. Sinolink's main points are as follows: Behind the China-U.S. tech stock divergence: valuation convergence under fundamental expectation suppression The recent performance of Chinese and U.S. tech stocks has shown a clear divergence. The direct trigger behind this is concerns about future fundamentals caused by potential sanctions risks represented by the U.S. FCC, which has suppressed valuations, while also being exacerbated by the still-crowded domestic trading structure. Currently, after significant adjustments in A-share tech stocks, prices/valuations have somewhat reflected investors' concerns about the future fundamentals of A-share tech stocks, but it is hard to say they have fully priced in: A-share tech stock valuations are still not cheap enough, and are even still higher than U.S. stocks: (1) From their own valuation levels, the PE TTM valuation percentiles of growth sectors represented by optical modules, PCB, and computing power chips are still above 60%, while PB valuation percentiles are even higher, all still above 85%. Although dynamic valuations may be reasonable and ROE levels have improved at present, this also means higher requirements are placed on future fundamental assumptions, and the basis for these assumptions is facing various uncertainties. (2) Compared with U.S. stocks: current A-share tech stock valuations are still higher than U.S. stocks, with PB slightly higher and PE far higher. From a sub-sector perspective: the PB valuations of A-share optical modules/PCB are still far higher than U.S. stocks; the PE valuation of A-share AI chips is far higher than U.S. stocks. The extreme relative scarcity and prosperity of Chinese tech stocks within A-shares in the past was the driving force behind their past excess returns and faster valuation increases; but during the global tech narrowing period, it has also become a hidden concern for future performance from the perspective of horizontal comparison among global tech stocks. Two possible directions for the future U.S. AI investment cycle Currently, after hitting new highs, U.S. stocks are also beginning to face their own problems: earnings are starting to show divergence due to differences in calculation methods, represented by OPEN AI's revenue ($50 billion VS $70 billion). Although optimists and pessimists each hold their own views, what is clear is that the future performance of U.S. AI tech stocks also faces significant uncertainty. Discussing by scenario: First, if the fundamentals of U.S. tech stocks are confirmed to be fine, then stock prices will return to strength, and for A-shares, there may also be a recovery after a sharp decline, but the extent will not be too large, and it will likely be weaker than U.S. stocks. The reasons are as follows: (1) The fundamental mapping relationship between Chinese and U.S. tech stocks has weakened. The core reason is that U.S. tech stocks have shifted from previously siphoning global investment funds to redistributing profits after focusing on future returns, channeling profits from the global AI industry chain back to the U.S. to support more distant investment needs. This is an inevitable choice in a scenario where overseas profit retention is scarce. Therefore, although the FCC has not yet taken effect, as long as it has not taken effect, it will continue to suppress fundamental expectations for Chinese sectors that the U.S. industry chain, represented by optical modules. (2) Trading-level issues have still not been fully digested. On Friday of this week (2026-10-09), A-share tech stocks showed a clear rebound after the sharp decline, mainly due to ETF/market stabilization funds entering to support the market, because the margin guarantee ratio has returned to near previous lows, and the necessity for market stabilization is rising. But even so, the concentration of mutual fund positions plus contrarian operations are the biggest factors constraining the rebound: since the end of July, during the weak rebound in tech stocks, mutual funds have shown clear contrarian operations in the electronics and communications sectors that were heavily overweighted in Q2, namely reducing positions during rebounds and slightly adding during declines. Second, if the fundamentals of U.S. tech stocks also run into problems, under the downward trend of U.S. tech stocks, A-share tech stocks may find it even harder to remain unaffected. In this case, the siphon effect of U.S. AI on global capital will decline, upward pressure on real interest rates will ease, and combined with the sharp decline in rate hike expectations in October, pressure from rising nominal rates will also ease somewhat. At this point, the allocation opportunity for gold may instead arrive. Therefore, from the current perspective, from a global investment perspective, holding a combination of U.S. AI tech stocks plus gold may be a hedging portfolio, but for domestic investors, A-share tech stocks do not hold an advantage in the tech narrowing process. At this time, the energy sector, which has lower sensitivity to interest rates and dividend attributes, instead becomes a better substitute. Domestic demand: a potential hedging choice, with positive short-term changes but also concerns Against the backdrop of high overseas interest rates plus China-U.S. tech divergence, in addition to energy plus gold, for investors who do not want to leave or cannot leave the market, domestic demand is also a potential hedging area: (1) On the one hand, after several years of continuous adjustment, the dividend yield of the consumer sector has become quite considerable, and even the dividend yields of some sub-sectors have surpassed those of banks. (2) On the other hand, policy has also been actively intensifying recently: on Friday of this week, the Ministry of Finance set the tone to "increase the intensity of countercyclical adjustment and step up efforts to expand domestic demand," and it is expected that the physical work volume of infrastructure in the fourth quarter will accelerate, providing some support for domestic demand. However, domestic demand currently also has some concerns: September PMI data show strong supply and weak demand, and the weakening of reality may not be over, which constrains the sustainability of stock price performance. Allocation approach under a comprehensive defensive mindset Since actively defensive was proposed, the market has clearly cooled; since comprehensive defense was proposed, the market temperature has further declined. The difference between active defense and comprehensive defense lies in: the former recognizes market risks but is still looking for assets with excess returns; while the latter focuses on asset allocation to prevent downside risks. For overseas investors, holding U.S. tech plus gold can still achieve effective hedging, but this does not hold for domestic investors. Gold is the dominant asset in the next scenario, and what can be sought now is the energy chain where demand is less sensitive to interest rates while the supply side has undergone major changes. Based on this, recommendations: First, the energy and chemical chain represented by oil, oil shipping, and coal will continue to benefit from global restocking demand for energy, while also being assets with dividend attributes. Second, against the backdrop of a slowing trend in the AI industry and diverging fundamentals, combined with the sharp decline in rate hike expectations in October, the suppression from real interest rates is gradually easing, and gold is ushering in an allocation opportunity. Risk warnings: Domestic economic recovery falls short of expectations, overseas economy declines significantly.