Summary of Key Points
Recently, there has been a one-sided shift in capital flow within the A-share market: a massive amount of money has poured into AI-related stocks (such as Cambricon and Zhongji Xuchuang), driving their market values to trillions or hundreds of billions of yuan, while traditional sectors (real estate, consumer goods, energy metals, etc.) have continued to decline in value. This surge has sparked two major debates: is it a short-term emotional bubble, or a long-term shift in the capital market's pricing logic? On one hand, there is real demand for AI (such as increased investment in computing power and practical applications in various industries); on the other hand, some companies are being valued at excessively high prices. The choice of AI by investors is not accidental but reflects both the global trend of a technological revolution and a shift in China's domestic capital allocation from real estate to technology. The AI-driven capital attraction will continue, but funds will likely become more focused on companies with proven performance, while traditional sectors may see temporary recovery.
I. One-Sided Capital Flow: How Severe is the Impact on Traditional Sectors?
The recent flow of capital in the A-share market has been like a floodgate opening, with technology stocks (TMT) accounting for 48% of total trading volume—meaning that one out of every two yuan traded went into AI-related stocks. For example, on July 21st, more than half of the 38 stocks with daily trading volumes exceeding 10 billion yuan were leaders in the AI industry (such as GigaDevice and Cambricon).
In contrast, traditional sectors have suffered significantly: energy metals and wind power photovoltaics have dropped by over 30%, steel and defense industries by over 20%, and real estate and liquor by over 10%. Even Guizhou Moutai, a stock known for its value, has fallen from its peak to 1,151 yuan. The trading volume of the entire liquor sector in the first half of the year was less than that of just one leading AI company (Zhongji Xuchuang). Even China National Nuclear Power, a stable dividend-paying utility stock, has seen its price drop by 27% compared to two years ago.
In short, half of the market's capital is focused on the AI sector, leaving traditional sectors behind in a situation of extreme polarization.
II. AI Valuations: Supported by Real Demand or Blown Up by Bubbles?
The biggest question is whether these high prices in AI stocks are justified:
Real Demand: AI is indeed the next major trend. For instance, the three major telecom operators are increasing their investments in computing power significantly (China Telecom by 26%, China Mobile by 62%); the AI server market is expected to reach 350 billion yuan by 2026. Real industries are also adopting AI—BYD uses it for research and development, CATL for battery quality control, and CNPC for diagnosing oil pump failures (reducing issue detection time from days to minutes). These are tangible industry demands, so it's normal for capital to invest early.
Bubbles: Some companies are being valued at inflated prices that may not be sustainable. For example, Cambricon has a rolling P/E ratio of 368 times (the industry average is 74 times), meaning it would take 368 years to recoup the investment based on current profits. Morgan Stanley predicts its net profit for 2027 to be 12.2 billion yuan, which would bring the P/E ratio down to 80 times—this includes all expected growth for the next five years in the stock price.
However, not all bubbles are bad; just like the internet bubble in 2000, although many companies went out of business, it also gave rise to giants like Amazon and Google. Jeff Bezos described the AI bubble as a "good one" because it quickly aggregates resources (money, talent, technology) and filters out truly valuable companies.
III. Why Do Investors Choose AI? Not by Chance, but by Inevitability
The shift in capital towards AI is not a whim but a combination of global trends and local demand:
Global Trends: The stock market reflects economic trends, and the main focus of industries changes with economic momentum. Over the past century, U.S. markets have shifted from railroads and steel (industrialization) to automobiles and consumer goods (consumption growth) to internet technology (innovation-driven growth). AI is now at the core of the next technological revolution. NVIDIA's market value has increased from 300 billion to 5 trillion yuan in just four years, demonstrating global investment in this field.
Local Factors in China: For the past 20 years, real estate has been the largest source of capital (60%-70% of residents' assets). However, after 2021, the real estate industry has adjusted, with annual sales dropping from 18 trillion to 10 trillion yuan, reducing its ability to attract funds. The market needs new investment targets: the AI ecosystem is extensive (from chips to servers to applications), and there is ample room for growth.
Therefore, AI becoming a focal point of capital investment is a direct reflection of economic transformation.
IV. What's the Future? The Siphoning Effect Will Continue, but Funds Will Be More Selective
In the short term, the AI-driven capital attraction will not stop abruptly, but it will become more targeted:
- Fund Realignments: Public funds are no longer blindly investing in AI concepts but are focusing on companies with clear performance (such as leaders in optical modules, AI servers, and memory chips), while also investing in traditional sectors (consumer goods, pharmaceuticals) to diversify risks.
- Bubble Clearing: Companies with overly inflated valuations or unfulfilled orders will be abandoned by investors, while those with genuine technology and contracts will survive.
- Opportunities in Traditional Sectors: Some funds may flow into undervalued traditional sectors (such as consumer goods and real estate), but this will likely be a temporary recovery, with the long-term focus still on AI.
Bo Shi Fund believes that the long-term trend of AI demand is strong, though there will be a short-term adjustment. Once financial reports confirm industry trends, AI-related stocks are expected to rebound.
Conclusion: Don't Simply Side With "Bubbles" or "Long-Term Trends"; Focus on Industry Implementation
This wave of AI investment is neither pure speculation nor a sustainable bull market. It is the inevitable result of a global technological revolution and China's economic transformation, mixed with both real demand and short-term bubbles.
For individual investors, don't let large market values dazzle you, nor completely dismiss the future of AI. Focus on two key aspects: whether companies have actual contracts and performance (not just promising narratives), and the progress of industry adoption (e.g., the increasing use of AI in various industries). Ultimately, it is technological breakthroughs and real profits that drive stock prices, not short-term sentiment.
(The entire analysis is written in plain language, avoiding technical jargon to make it understandable to non-financial professionals.)