Summary of Key Points
This article focuses on the "transition between the old and the new" in China's stock market in 2026: AI-related companies (such as ChangXin Technology and Cambricon) have seen their valuations soar due to the market's pursuit of "long-term potential," while once-high-growth stars (from industries like the internet, new electric vehicles, and consumer goods, referred to as "old stocks") have experienced significant valuation declines due to growth stagnation and a shift in market pricing logic (from focusing on scale to profitability/cash flow). In July, the AI sector saw a short-term correction, and the old stocks rebounded from their excessive declines, but this does not represent a long-term reversal. The article concludes that for these old stocks to regain market recognition, they need to either integrate AI into their businesses or demonstrate the value of their core operations.
1. What are "old stocks," and why have they lost their appeal?
"Old stocks" is not an offensive term; it refers to companies that were once hot favorites in the stock market due to their high growth, high valuations, and significant attention but now need to prove their worth again (such as Meituan, BYD, and Mxy Ice City).
There are three main reasons for their decline:
1. Changing market preferences: The stock market used to value companies based on scale (number of users, sales volume, number of stores), but now it focuses on tangible financial metrics like profitability and cash flow. For example, ZeroRun Automobiles sold over 100,000 vehicles in July, yet its profit margin was compressed to 3.2% due to price competition, and its stock price remained below the issue price; Mxy Ice City faced challenges in expanding overseas, resulting in a 150 billion Hong Kong dollar loss in market value.
2. Shifts in industry dynamics: Industries such as the internet and consumer goods have reached growth peaks, and competition has shifted from capturing market share to securing profits. For instance, Meituan lost 16 billion yuan in a single quarter during its delivery war, but the market valued its scale expansion at that time; now that its profits have stabilized, it is being neglected due to slower growth.
3. Exposure of internal issues: Some industries are highly competitive and lack innovation (for example, many people open milk tea shops, leaving little room for new entrants). New electric vehicle companies are engaged in price wars, leading to increased sales but not higher profits; IP-driven companies like PopMart have seen declining repurchase rates after the initial excitement, which has affected their valuations.
2. How did AI startups become the new favorites? Is it due to hype or real performance?
AI companies have risen to prominence thanks to a combination of "hype" and actual performance:
1. The market's pursuit of long-term potential: Investors are willing to invest in areas with potential for significant future profits, such as computing power, large models, and robotics, which are seen as the next growth drivers. For example, Yushu Technology's net profit after deducting non-recurring items declined in the first quarter, but its price-earnings ratio was as high as 219 times (the industry average is only 38 times), reflecting market optimism about its future robotics business.
2. Some companies have solid performance: Not all AI companies rely on hype; for instance, New EasySheng (a photonics module company) saw its stock price increase tenfold in a year, with a 236% increase in net profit in 2025, indicating the industry's ongoing progress.
3. The scarcity of domestic alternatives: ChangXin Technology's market value exceeded 4.1 trillion yuan, making it the largest company in the A-share market, not only due to its strong fundamentals but also because it represents a breakthrough in domestic storage chips. The market is willing to offer higher valuations to companies that break through in strategic areas (even compared to international giants like Micron and Samsung).
3. The July reversal: AI stocks fell, while old stocks rose—has the market trend changed?
In July, the AI sector experienced a significant drop (New EasySheng's stock price dropped by nearly 60%, and Cambricon's market value fell below one trillion yuan), while old stocks rebounded (Meituan's stock price rose by nearly 40%, and Alibaba's by 30%). However, this was not a reversal in market trends but a short-term adjustment:
1. Reasons for AI stocks' decline: They had risen too much earlier, leading some investors to sell; the market began to question the cost-effectiveness of AI investments (companies spending heavily on computing power and models without corresponding revenue growth); new AI stocks listed on the Hong Kong stock market increased liquidity, causing price volatility (for example, MiniMax's stock price dropped by over 20% on its listing day).
2. Reasons for old stocks' rise: Their valuations were too low after the sharp declines. For example, Meituan's stock price fell to HK$63 (a two-year low), and Alibaba's below HK$100, attracting investors looking for bargains. However, this was just a temporary recovery; both companies saw declines in August, indicating that market sentiment has not changed.
3. Conclusion: The market does not solely rely on hype and will not permanently ignore profitable companies. For old stocks to turn things around, they need to provide new orders, revenue, or profit growth to prove their worth, rather than relying on short-term rebounds.
4. Is there hope for old stocks? It depends on three scenarios:
The possibility of old stocks regaining market recognition depends on the following situations:
1. Using AI to create new businesses: Companies with user bases, data, and distribution channels can leverage AI to develop new services. For example, Alibaba's large models and Tencent's "YuanBao" AI assistant can reduce customer acquisition costs or increase advertising revenue, potentially leading to higher valuations.
2. Using AI to improve efficiency: These companies can use AI to optimize supply chains, customer service, and marketing. For instance, Meituan uses AI to predict order volumes and reduce inventory waste, while Alibaba uses it to optimize logistics, thereby increasing profitability.
3. Companies without a clear AI strategy: They must rely on their core businesses to prove their value. New electric vehicle companies need to show that increased sales translate into higher profits, and tea drink companies must demonstrate that expanding overseas markets or having unique products generates recurring revenue.
The key is to show a positive cost-effectiveness: The market wants to see evidence that investments in AI lead to increased profitability or improved efficiency. For example, Amazon's AWS cloud business has seen rapid growth despite heavy investment in AI, leading to higher stock prices; in contrast, Google's high investment in AI has put pressure on its cash flow, resulting in a decline in stock price. Chinese companies must also provide tangible results rather than just relying on AI hype.
In conclusion:
AI startups have gained prominence due to their potential for future growth, while old stocks need to either use AI to increase profitability or strengthen their core businesses. The stock market ultimately values companies based on their ability to generate real profits.