Why is the A-share technology sector more favored?

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From our reporter Mao Yirong

From the resilience of domestic demand at the macro level, to the high-visibility of AI compute power and power equipment at the industrial level, and then to the marginal shift as global capital re-evaluates the value of China’s asset allocation—Chinese technology assets are becoming a distinctive landscape.

Recently, multiple investment institutions said that the main contradiction in market pricing is shifting from “valuation expansion” to “profit-driven, certainty-driven,” and with A-share technology sectors supported by solid fundamentals, they are expected to receive more attention during the earnings period. For example, in its April outlook, Pictet Asset Management of Switzerland mentioned: “Chinese stocks are an exception. With strong commodity reserves, sufficient alternative energy supply, and policy support, we still maintain our positive stance.”

UBS Wealth Management’s office of the Chief Investment Officer expects that this year the earnings growth rate of China’s A-share technology sector could reach 20% to 25%. In addition, the policy environment actively supports AI development and technological innovation. As market sentiment and fundamentals improve, earnings, valuations, and positioning are expected to gradually recover.

Macroeconomic resilience forms the foundation

Global capital is paying more attention to markets with abundant policy space, solid industrial foundations, and valuations that have potential to be repaired. “China maintains a moderately loose monetary environment, while fiscal policy is more proactive. With the two working in tandem, the exchange rate overall remains stable. China’s assets show a certain degree of room for repair and risk diversification effects in a globally high-volatility environment.” Cheng Shi, Chief Economist at Industrial and Commercial Bank of China International, said.

From a macro perspective, China is accelerating the formation of a development pattern led by domestic demand. In its 2026 Government Work Report, China mentioned in its deployment of government work tasks for 2026: “Focus on building a strong domestic market. Adhere to domestic-demand-led development, coordinate efforts to boost consumption and expand investment, expand new space for growth driven by domestic demand, and better leverage the advantages of our super-large market.”

Yan Xiang, Chief Economist at Founder Securities, told a reporter from the Securities Daily that China’s economy is currently forming a new development pattern driven by domestic demand and innovation. Now, China has the capability for domestic-demand growth and the potential for the future, because China has the world’s most complete industrial system, with large industrial scale, strong supporting capacity, and clear advantages in costs, categories, and speed.

The policy side’s proactive efforts further consolidate market confidence. “In the short term, external disruptions will not change the long-term positive trend of A shares. After equities undergo rapid adjustment, their allocation value will become even more prominent.” Yan Xiang said. Macroeconomic resilience provides a solid foundation for the valuation repair of the technology sector, and it is also the fundamental support that allows China’s assets to be able to be “exceptionally strong” amid global turbulence.

A breakout for technology sector prosperity

Macroeconomic resilience provides a margin of safety, while the industry’s own business-cycle upturn for technology becomes the core driving force for attracting funds to actively allocate. “Compared with general industrial sectors, the technology sector has higher ROE (return on equity) and greater elasticity.” Wu Kaida, Chief Analyst for Strategy at Tielong Securities (Rights Protection) and head of the Policy Research Institute, told a reporter from the Securities Daily. In this round of technological innovation cycle, from a long-term perspective, industry performance converges toward industry ROE levels. Stock prices match their return on equity, and technology and high-end manufacturing sectors enjoy more room for improvement.

The core driving force behind this round of technology-sector prosperity comes from the substantive rollout of the AI industry. She Lingxing, Chief Analyst in the electronics sector at Guosheng Securities, believes that Token consumption is entering an exponential leap, the gap in inference compute power is becoming apparent, and mismatches between compute supply and demand are intensifying. Domestic compute power is expected to gradually take a dominant position at the infrastructure level, leveraging cost advantages and a more complete ecosystem. From compute infrastructure to power equipment, from semiconductors to communications equipment, the entire industrial chain is forming a positive feedback loop of “demand pulling through, performance being realized, and valuation repair.”

From the perspective of global capital flows, China’s under-allocation status in technology assets and their scarcity are giving rise to a new round of systematic re-pricing. From the valuation perspective, the market’s adjustment earlier has already brought technology sector valuations back to a reasonable range. Xu Yingbo, Chief Analyst for the technology industry at CITIC Securities, believes that recent market pullbacks have caused valuations to fall, and continued investment related to AI will continue to support demand for hardware and semiconductor companies.

Lu Zhe, Chief Economist at Soochow Securities, said that in 2026, China’s technology assets will show significant resilience against risks. Core indices such as the STAR Market Composite Index and the Growth Enterprise Market Index have experienced pullback ranges far smaller than major overseas indices such as the Nasdaq 100, the S&P 500, and the Nikkei 225. Both volatility and maximum drawdown are better than those of global peers. Its stability comes from domestic-demand leadership, policy support at the backstop level, independent and controllable industrial chains, and breakthroughs in homegrown technology—forming an operating logic independent of overseas markets.

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