The tide of trading enthusiasm surges, and some things have truly made a comeback.

A momentum-filled rally has reversed the stigma of the previous bear market. After the surge, as things cool down, past investment thinking has to undergo some shifts, and some clues are gradually emerging.

On Friday, the A-share technology sector, represented by chip stocks, saw another significant increase. On one hand, the importance of technological innovation has been highlighted, pointing out the development direction for domestic semiconductor and tech companies. On the other hand, the global leader in semiconductors has released a very impressive set of financial results.

It's not so much that the market has chosen chips, but rather that after policy finally resonates with the industry's fundamentals, the chip sector is returning to its rightful place.

Starting with the "crazy bull," a "prolonged war" of stock market rallies began on September 24th, with major Chinese stock indices all rising, led by A-shares and Chinese concept stocks. Consumer, healthcare, and real estate sectors took the lead, with the Shanghai Composite Index surging by over 600 points, a rise of more than 20%, which is also rare in history.

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A scenario of oversold conditions saw a policy-driven rush for funds to buy stocks rapidly unfold before our eyes. The fear and despair before the market eruption, and the heat and madness after the market's rapid explosion, form a stark contrast, making it a rare case in behavioral finance.

Indeed, the stigma of a bear market can only be reversed by a momentum-filled actual increase, and the market needs such a surge. Behind the policy combination before the holiday is a directional change in policy guidance. Some facts have been seen clearly, and some decisions have already been "fired."

If the long-term downturn and historically low valuation levels were the conditions for a rapid eruption, then the enthusiastic response to the policy's unexpected benefits is the core. And the overall background and atmosphere are the high market sentiment, the expression of public opinion, and a strong correction to the pessimistic "linear extrapolation."Qualitatively speaking, this round of market movement is set against the backdrop of a decline in risk-free interest rates, with a shift in policy as the core driver, and opportunities arise from the joint enhancement of risk preferences both domestically and internationally. If subsequent fiscal policies continue to exert force and the economic fundamentals gradually improve, we are inclined to believe that the market will have the potential to evolve from a rebound to a reversal, which will not be a simple and short-lived rise.

However, this process is destined to be anything but smooth sailing. While capital and policies can be seen, the operation of the economy is complex. Therefore, strategically, one must have confidence, but tactically, a bit more patience is required. Perhaps a "crazy bull" has fulfilled its mission, the equity market has awakened, and the bull market mentality has planted seeds in people's hearts, showing a direction.

After the initial phase of widespread recovery, the market is likely to enter a stage of "prolonged warfare" characterized by fluctuations, also known as "divergences leading to main lines." In such a market, focusing on volatility is merely technical analysis; the more critical aspect is strategic choice. The significance of the fluctuation period lies not in short-term gains and losses but in the structural adjustments for the medium term.

Which direction should we look towards? After the large-scale rise in indices attracts capital inflow, the market will subsequently experience a period of structural trends. In the process of shifting from beta to alpha, sectors with a clear fundamental main line begin to dominate the market, focusing on purer poetry and distant places, with chips navigating through divergences.

In a "prolonged warfare" of stock market increases, grander narratives will have stronger offensive capabilities. We need to focus on purer poetry and distant places. Against the backdrop of very active trading volumes, the direction represented by "chips," which combines "China's core assets" and "new quality productive forces," is expected to become the main line of the market in the next phase.

Who has navigated through divergences?

A layout facing "choke points"

After the noise returns to calmness, excellent investors will objectively accept the real changes in the macro environment and underlying assets, and provide their responses. At the current juncture, chips have three core logics:

Firstly, the fundamentals are solid, with domestic and international upward cycles resonating.

Both global and Chinese semiconductor sales have achieved positive year-on-year growth for ten consecutive months, and have maintained double-digit year-on-year increases since the beginning of this year. In August, global semiconductor sales reached a historical high. Under the trend of rapid ecological innovation and high profits, the global semiconductor industry is in a major growth trend.In the current market, the chip sector is one of the directions where the fundamentals are superior. On October 17th, TSMC, the global leader in chip foundry services, announced its financial results for the third quarter of 2024, with all indicators significantly exceeding expectations. On the same day, during the legal briefing meeting, TSMC Chairman Mark Liu stated that the company's annual revenue is expected to grow by nearly 30%, igniting the market.

Overall, global chip demand has stabilized and begun to improve. Recently, 17 semiconductor companies in the A-share market have announced their performance forecasts for the first three quarters, with nearly 90% reporting positive results. Against the backdrop of the global semiconductor industry's demand stabilizing and gradually improving, the A-share related sectors, as a main direction for technological independence, have attracted attention from capital.

Secondly, the demand for domestic substitution is strong, with investment amounts setting new records. With the development of AI, several new electronic products have been released recently. For instance, Huawei's autumn product launch introduced products such as the Huawei Smart Screen V5Max110 and the Smart Boundary R7, among others, reflecting a robust demand for chips.

According to SEMI's forecast, global 300mm wafer fab equipment spending will exceed $400 billion for the first time between 2025 and 2027, with China maintaining its leading position, with investments exceeding $100 billion.

Lastly, the trend of the future is already apparent, as China advances its modernization, science and technology must take the lead. On the afternoon of the 17th, it was pointed out that advancing Chinese-style modernization requires science and technology to take the lead, and technological innovation is the only way forward. "How many times can one strive in life?" The directive encourages bold innovation and creation, contributing wisdom and strength to the construction of a strong science and technology nation. This directive clarifies the development direction for domestic semiconductor and technology enterprises, emphasizing that technological self-reliance and strength are the core drivers of industry progress.

Every round of increase is a combination of divergence and consensus, and every bull market is a brand-new bull market. With the release of domestic "package of incremental policies," terminal consumer market demand will be further stimulated, promoting the growth of demand in the semiconductor industry chain. Combined with the continuous rise in demand in fields such as AI, smartphones, and the Internet of Things, the domestic semiconductor industry will enter a new round of growth cycle.

How many times can one strive in life?

See the beta of the era.No matter what, we are now at the crossroads of a new cycle, with capital once again focusing on technology.

How important is technology? At present, technology has become a crucial engine, with both monetary policy and fiscal policy leaning towards it. Opportunities follow capital, capital follows industry, and industry follows policy. The technology sector in developed markets has already shone brightly, and some people have survived the long winter by relying on technology stocks from the other shore.

Looking deep into the cycle, stock investment is like finding alpha as if digging for gold, and finding beta is like choosing a rich mine. Heroes are made by the times, and any great victory of alpha is built on the correct choice of beta.

From the "five golden flowers" of real estate, non-ferrous metals, coal, steel, and finance in the industrial manufacturing era of 2007, to the TMT and Internet+ of the mobile Internet era in 2015, to the long-slope-thick-snow white wine and pharmaceuticals under the logic of consumption upgrading in 2019, and then to the rise of new energy under "carbon peak, carbon neutrality" in 2020, all the track stocks have emerged from the waves of the times.

The main line of investment in the domestic chip industry is "independent and controllable" and solving the "neck-grabbing" problem. As long as this logic continues, the investment value of the chip semiconductor sector will not be easily overturned, and there will be room for the long term.

The present is no longer the past. In today's era of popular self-media, the road that used to take a long time to walk is now walked very quickly. It seems that even the street vegetable sellers can feel the difference, and they all know that chips are one of the most important research directions for the country at present.

Yes, looking at the global situation, various sanctions from Europe and America have led to continuous problems in the global industrial chain, and the world economic situation is becoming increasingly severe and complex. In the context of the global supply chain being divided, we are in an unprecedented great change in a hundred years. Based on the macro situation and policy orientation, "national security," independent control, and high-end manufacturing may be the beta of the current era.

"The wind is born on the ground, starting from the end of the clear duckweed." Under the dark currents, the direction of the tide is changing, but the endgame may not appear so early.

How many times can the market fight? The new round of wealth creation in China's chip sector may be starting, and then the tide will change direction and flow away. At this moment in history, we can only vaguely perceive the slight trembling at the end of the clear duckweed.