Summary of Key Points
In the first half of 2026, technology sectors such as AI and semiconductors were in strong demand, attracting many young investors who believed in the concept of "domestic substitution" and bought related funds, achieving profits in June. However, the market took a sharp turn for the worse in July, resulting in significant losses for many investors, equivalent to several months' worth of salary. The reasons behind this include: a global panic over excess computing power, excessive gains in the A-share market that led to profit-taking, and young investors' tendency to concentrate their investments while ignoring cyclical patterns.
Detailed Analysis
The "Technology Disaster" for Young Investors in July
As July began, the investment accounts of many young people shifted from showing red (profits) to green (losses). Xie Liang, who had just lost his job, used 350,000 yuan to invest in 13 AI-related funds (focusing on semiconductors, computing power, and memory chips). He made a profit of 20,000-30,000 yuan in June but then lost 56,000 yuan in July, with daily losses reaching 10,000 yuan. Li Xiang, a worker from Guangdong, had a profit of 7,000 yuan at the end of June but lost 20,000 yuan by July 15, seeing his principal drop by nearly 30%. Social media on July 15 marked a turning point for many investors, with the market declining for 8 out of 11 trading days, losing 5-7 percent daily. Young investors realized that the problem wasn't with their technical analysis but with their inability to resist the urge to buy at high prices.
The Trigger: Overseas Panic over Excess Computing Power
On July 1, Meta (the parent company of Facebook) announced the sale of its idle AI computing power. As the world's largest purchaser of GPUs, Meta's move raised concerns about whether too much investment had been made in AI infrastructure. On that day, CoreWeave in the U.S. fell by 13.9%, and Micron Technology lost more than 10%; A-share companies like ZhaoYiXinChuang and XinYiSheng also experienced heavy losses. Blackstone Group sold $3.5 billion worth of data center assets and abandoned a large project worth $10 billion, further fueling the panic. The situation was even worse in South Korea, where Samsung and SK Hynix had been driving the AI market growth. However, weak shipment figures from these companies, combined with high leverage in ETFs held by retail investors, spread panic to the A-share market, causing the semiconductor sector to crash.
The A-share Market's Own Excessive Gains
The A-share technology sector had seen incredible gains in the first half of the year: the memory chip index rose by 165%, and companies in areas like optical modules and computing power saw tripled returns. These gains created a situation similar to an "impounded lake"—many investors had made money and were ready to sell as soon as there was a reason. July 15 was the deadline for earnings reports, and although technology stocks performed well, their prices had already priced in future profits. The combination of overseas panic, excessive market gains, and the earnings report period led to a mass sell-off.
Young Investors' Investment Mistakes
These young investors were not just following rumors but were convinced by the concept of "domestic substitution," which led them to invest in AI chips and semiconductors. Their mistakes included:
- Overconcentration of Investments: Xie Liang invested in 13 funds, seemingly diversifying his portfolio, but most of these funds focused on the same technology stocks without any defensive assets like gold or bonds, leaving him with no buffer during market downturns.
- Confusing Trends with Stock Prices: They believed that AI was a long-term trend and continued to buy, unaware that stock prices had already exceeded their intrinsic value, effectively pricing in future gains.
Technology Stocks Are Not Forever Rising
Many young investors thought that AI would ensure perpetual growth for technology stocks, but these are cyclical assets. Memory chips, for example, have a natural cycle of demand and supply. Even if a company like ChangXin Technology earns 10 billion yuan this year, it might only earn 5 billion yuan next year, and its high market value might not be sustainable. The principle of capital markets is that excessive gains eventually lead to a correction, removing those who bought at high prices.
Final Reminder
It's fine to believe in the potential of domestic industries, but don't let that belief cloud your judgment. Invest wisely by understanding market cycles and taking defensive measures; don't put all your money into one sector. After all, capital doesn't fall from the sky—it moves from your pocket to someone else's.
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