Hexun Information Ren Lingkang: The technology sector has already increased so much; is it very risky to invest now?

On May 11th, Ren Lingkang from Hexun Information stated, let’s first look at the performance of the global markets. U.S. stocks surged significantly on Friday, which is also one of the reasons driving the rise in today’s indices. The overseas markets had mixed movements, but overall, there were more gains than losses, with the biggest increase in the Korean market, which rose over 4% again today. There are signs of market divergence; as we mentioned before, the current main market trend is shortage-driven rallies, with the primary focus on artificial intelligence. In AI, the shortages that cannot be resolved in the short term and are causing product prices to rise are typical, such as storage chips. Storage chips have recently experienced a sustained surge with increased trading volume. As we mentioned in yesterday’s headline, the main investment theme in the market is speculating on shortages and price increases.

Second, we have repeatedly emphasized what the main investment theme is. Today, everyone can see that many sectors in the market are still declining, while other sectors have very small gains. The largest gain is in storage chips, followed by hardware stocks within AI. You can see continued volume expansion and sustained upward movement. Sectors like electronics, optical communications, and others have also experienced very large increases.

Actually, we explained this logical relationship to everyone long ago. Currently, upstream capital expenditure in AI is still increasing significantly. Last year, North American market capital expenditure was $450 billion, with a forecast of $850 billion by 2026, an increase of over 80%. The substantial increase in upstream capital expenditure will inevitably lead to a significant rise in downstream hardware procurement. As AI continues to evolve and products are upgraded, high-end products remain in shortage, and their prices are still rising sharply upon shipment. This is the current main investment theme in the market.

Some people say that since the gains are already so large, entering now might be very risky. My view is that upstream capital expenditure is still increasing, so the idea that this industry has peaked may not necessarily be valid. Second, prices may fluctuate after significant gains, and there could be high-level consolidation for a period. However, as long as the shortage and price increase issues are not fully resolved, a sharp decline or peak is unlikely. Product prices will continue to rise, and the profitability of listed companies will keep improving. After digesting profit-taking, the probability of stock prices moving upward remains quite high. This is our overall assessment of the sector. Currently, it can be said that only by 2027 or even 2028 will related products possibly resolve the shortage issues.

(Chief Editor: Cui Chen HX015)

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