The underlying logic behind the undeserved sell-off and gear shift of the tech bull market

This weekend, before many people could fully recover from the deep V-shaped reversal of the "Miracle Day" on Friday, they rushed to ask the shopkeeper a question: Is this a rebound or a reversal? Is the tech bull market still here at all?

Let's not rush to give an answer. The shopkeeper will take you to dissect the market of the past half month layer by layer. Because the answer never lies in the K-line, but in the industry, the overall landscape, and the grand logic of the era.

I. Why did A-shares stage a sharp rebound after accelerating to hit the bottom?

Let's start with the conclusion: This is not a "rebound brought about by market rescue", but a "natural bottoming out after falling to the extreme".

Many people simply attribute Friday's deep V-shaped reversal to "national team market rescue" and "policy bottom support". The shopkeeper is going to pour a basin of cold water as well as a basin of warm water — Market rescue is the "ignition trigger", but what really sets the market on fire is that the market itself has fallen to a reasonable level.

Market rescue is both necessary and definitely useful, and it also demonstrates the country's emphasis on the capital market. But market rescue aims to deliver liquidity and confidence that the market lacks in the short term, while the core driving force for the substantial rebound of the market is the inherent momentum of the market itself to hit the bottom and rebound.

How to understand "falling to a reasonable level"? The shopkeeper will show you three signals, each of which is hard evidence of the "bottom area".

First, rumors are running wild, which is exactly the sign of the sentiment bottom.

This week, three things are circulating in the market: first, the rumor of "conflict between CATL and public funds", second, the rumor of "private equity liquidation", third, the rumor that "private fund managers made huge losses due to heavy positions in AI technology and publicly apologized to holders" — Quan Long, a fund manager of a Shanghai-based private equity, personally said that "the loss this time is too big" and "it's all my responsibility".

Regardless of the truth of the above rumors, the shopkeeper wants to tell you a counterintuitive judgment: The concentrated outbreak of these negative rumors is precisely the most typical signal of the bottom area, not the beginning of panic, but the end of panic.

Why? Because when extreme signals such as "private equity apology", "liquidation rumors" and "white horse stocks being sold off at no cost" appear, it means that the most vulnerable batch of chips (leveraged funds, panic selling orders, stop-loss orders) can no longer hold on and have been handed over. In history, every "private equity apology wave" and "liquidation rumor wave" almost corresponds to the end of a round of adjustment. There is a good saying — after the white horse leading stocks with heavy fund positions are sold off at no cost, the market often enters the range of "the last drop".

Second, 55 stocks hit the limit down and 33 hit the limit up on Thursday, which is differentiation, not a bear market.

The shopkeeper wants you to remember this number: On Thursday (October 22), A-shares broke the position with expanded trading volume, the ChiNext Index plummeted 4.37%, and nearly 5000 stocks in the whole market fell. But behind the 55 limit-down stocks, there were 33 limit-up stocks, and the ones that hit the limit up were the humanoid robots that the shopkeeper has repeatedly mentioned (Daye Co., Ltd. has 5 consecutive limit ups, Zhaowei Machinery & Electronics has 2 limit ups in 4 days, and it continued to hit the limit up on Friday), and banks (ICBC and CCB hit new highs).

55 limit down, 33 limit up — what is this called? This is called "two extremes of ice and fire", "structural differentiation", "style switch" — it is by no means a "full bear market".

The shopkeeper wants you to engrave this sentence in your mind: A real bear market is characterized by indiscriminate decline of all stocks, few limit up, and hundreds or even thousands of stocks hitting limit down at the same time; while the differentiation on Thursday that "AI hardware collapsed but humanoid robots and banks bucked the trend to lead the rise" precisely shows that the market is "changing direction" rather than "collapsing". Funds have not left the market, they have just moved from "AI hardware" to "AI applications, AI edge side, and physical AI".

Third, the policy bottom has been consolidated, and the market bottom is being formed gradually.

This week, policies are so dense that people can't take them all in: at the Financial Street Forum, four major authorities including the central bank, the China Securities Regulatory Commission, the State Administration of Financial Regulation, and the State Administration of Foreign Exchange made collective statements, the first batch of 18 active ETFs were launched for sale, fund companies made collective self-purchases (E Fund, China Asset Management, Fullgoal Fund, and Harvest Fund each invested 200 million yuan), stock ETFs recorded net inflows of over 210 billion yuan for 13 consecutive trading days, the General Office of the CPC Central Committee and the General Office of the State Council issued the top-level document for "Artificial Intelligence +", and eight departments issued the "15th Five-Year Plan" outline...

The shopkeeper's definition is: The policy bottom has been consolidated. But "policy bottom" does not equal "market bottom" — the policy is to "support the bottom" rather than "drive a sharp rise"; the real market bottom needs to be confirmed by the market itself through "falling to a reasonable level + full chip clearance".

So is Friday's deep V the effect of market rescue, or the market's own rebound momentum? The shopkeeper's answer is — Both, but the market's own momentum is stronger. Market rescue (ETF bottom support, fund self-purchase) provides a safety cushion of "support at the lower level", but what really makes the market stage a V-shaped reversal after accelerating to hit the bottom is "chip clearance + sentiment freezing point" after extreme overfall — when there is no more room to fall, that is the biggest positive factor.

Why did the shopkeeper dare to shout "it is suitable to buy at the low point" when the market went lower at Friday's opening?

This is probably the thing you are most curious about. When the market was still going down after Friday's opening, the shopkeeper clearly gave a prompt in the community — "it is suitable to buy at the low point today".

Why did the shopkeeper dare to do that? Because the shopkeeper saw three things happening at the same time: First, overfall (the ChiNext Index has fallen by more than 40% from its high in June, and the optical module sector has been halved); second, policy bottom support (continuous ETF net inflow + fund self-purchase + rumor refutation); third, sentiment freezing point (the number of limit-down stocks, the ratio of rising to falling stocks, and the median index all reached extreme levels). When these three conditions are met, plus the unexpected accelerated bottoming out on Friday, it forms the "bottom area" that the shopkeeper has repeatedly mentioned.

But the shopkeeper wants to specially emphasize a sentence, which is the shopkeeper's principle of bottom-fishing and also the most worthy sentence for investors to remember:

"The principle of bottom-fishing is: buy the ones that are supported by earnings growth, have fallen the most, and have the most severe overfall." Good companies will be mispriced and sold down, but after being mispriced, they will rebound and even recover their previous levels.

In other words, bottom-fishing is not "buying with eyes closed", but "looking for companies with solid performance in the overfall sector". Why? Because in the third quarterly report window where "performance fulfillment" becomes the core pricing axis, only overfallen stocks "supported by earnings growth" can fall and then rebound; while overfallen stocks without performance support are very likely to fall into an abyss after dropping.

This is the logical transformation of the shopkeeper from "grinding the bottom requires more patience than bottom-fishing" to "it is suitable to buy at the low point today" — defend in normal times, wait patiently for the bottom; when the bottom area is truly confirmed (triple confirmation of overfall, policy support, and sentiment freezing point), take decisive action to buy the overfallen stocks with solid performance. This is not contradictory. It is the three-stage model of "defense - waiting - bottom-fishing", which is a discipline.

II. Is the value of tech stocks still there?

Let's first answer the most piercing question: Are tech stocks still worth holding?

The shopkeeper gives the answer directly: The value of tech stocks is not only still there, but is now in a window of "value revaluation after being mispriced and oversold". The shopkeeper will show you hard evidence from three dimensions.

First, tech companies are voting for themselves with real money — through intensive share repurchases.

In this round of decline, the most memorable thing is not how much the market has fallen, but that leading tech companies collectively launched repurchases when prices fell to low levels. Hygon, Sugon, Montage Technology, Shengyi Technology... a batch of leading tech companies have successively announced repurchase plans. The shopkeeper wants to tell you: In history, intensive repurchases by leading tech companies are usually the leading signal of a relatively bottom area. Because industrial capital knows best how much their own companies are worth, and they dare to buy at low levels, which means they themselves think "prices have fallen too far".

Second, the profits of tech companies are growing historically — this is the key for "cyclical stocks" to transform into "growth stocks".

The shopkeeper wants to talk about the most important cognitive upgrade, which is worth your repeated consideration:

AI hardware has transformed from "historical cyclical stocks" to "growth stocks".

What does that mean? In the past, semiconductors, storage, and panels were typical cyclical stocks — they made money from the "price rise cycle", rose for a round and then fell for a round, with profits fluctuating drastically. But this round of AI technological revolution has completely changed this logic:

DRAM prices are still rising (the price index rose by 0.9% last week); computing power rental prices are still rising (the rental price of B200 has increased by more than 30% in the past quarter); the performance of most global tech hardware companies is still growing strongly.

What the shopkeeper wants you to see is: This is not a one-off deal of the "price rise cycle", but sustained growth driven by "AI demand". The profits of AI hardware such as storage, optical communications, copper clad laminates, and advanced packaging are not "cyclical pulses", but "growing upward trends".

When a company's profit changes from "drastic cyclical fluctuations" to a "sustained upward growth curve", its valuation system will switch from "cyclical stock" to "growth stock". This is what the shopkeeper said — AI hardware is moving from cyclical stocks to growth stocks.

Third, Chinese tech companies are moving from "domestic substitution" to "global competition", and there is still huge room for growth.

The shopkeeper wants to talk about a larger landscape: In this round of AI technological revolution, Chinese tech companies are completing the transition from "followers" to "competitors", especially in high-end AI hardware products and high-end equipment, there is still huge room for growth.

ASML (the lithography giant) officially announced a 10% price increase for all its South Korean customers — on the surface, this is bad news for semiconductor manufacturing, but looking deeper, the stronger the pricing power of equipment manufacturers, the more solid the substitution logic for domestic semiconductor equipment. China is on the path of domestic substitution, moving from "usable" to "good to use" and then to "leading", and it is moving faster than ever before.

The shopkeeper's conclusion: The value of tech stocks does not lie in the rise and fall of stock prices, but in the industrial trend and profit growth. In this round of decline, what has fallen is "valuation and sentiment", not "industry and profit". The tech stocks that have fallen to the current level are exactly the time when "value" and "price" are closest to each other.

III. Why is the tech bull market still ongoing?

In the shopkeeper's view, everyone needs to see that the core of this round of bull market is the tech bull market, not a unilateral bull market across the entire A-share market for the time being. The market firmly believes that China's technology will continue to rise. Moreover, this will be the first time that China truly stands at the main venue of the global technological revolution and becomes a leader.

Therefore, the shopkeeper's most firm judgment is: The tech bull market is still here.

The shopkeeper will explain three layers, from industry to landscape, from the earth to space, each layer larger than the previous one.

First layer: This is the largest round of technological revolution in human history, far exceeding the Internet revolution.

The shopkeeper gives you a simple judgment: The improvement of production efficiency and social productivity brought by the AI technological revolution far exceeds that of the Internet revolution, and may even be 10 times or 100 times that of the Internet revolution. The Internet changed "information connection", while AI changed "intelligence substitution" — when machines begin to replace human mental work, the production efficiency of human society will usher in an exponential leap.

And the more important part is the following layer.

Second layer: In previous technological revolutions, China was a follower; but in this round of AI revolution, China will stand in the position of "two-way leading" for the first time.

The shopkeeper says a sentence that many people are reluctant to face but have to face: In every past technological revolution — steam engine, electricity, Internet — China was a "follower" and "chaser", and never served as a "leader". But in this round of AI technological revolution, China has the opportunity for the first time to stand side by side with the United States in the position of "two-way leading" the global AI wave.

Why? 2012 is usually regarded as the beginning of the modern AI wave. At the end of 2022, OpenAI released ChatGPT, bringing large language models and generative AI from laboratories and professional technology circles to the public. China went from early attention in 2014-2015, strategic establishment in 2016-2017, to full acceleration of artificial intelligence development from 2024 to now, and quickly included artificial intelligence development into the national strategy.

For this reason, Chinese AI companies have already reached the global first echelon in large models, applications, edge-side, and embodied intelligence; Chinese AI hardware, AI applications, AI edge-side, and physical AI are completing the transition from "domestic substitution" to "global competition". This is the first time in the history of technological revolution development for China to possibly become a "leader" rather than a "follower".

Third layer: From land power, sea power to space power — the final destination of the AI revolution is the sea of stars.

The shopkeeper wants to talk about a larger landscape. This sentence may be a little ahead of time, but the shopkeeper believes it is the right direction:

Human resource competition has evolved from land power (land) to sea power (shipping lanes), and now is moving towards space power (space resources). And AI is exactly the lever that pries space power — AI computing power needs energy, and the ultimate source of energy is space (the sun); AI data needs computing power, and the ultimate form of computing power is distributed; future resource allocation