1. The recent sell-off in technology stocks reflects a collision between two timelines: industrial progress, which unfolds over years as data centers are built, semiconductor capacity expands, and power grids are upgraded, and financial markets, which reprice assets within days due to shifts in risk appetite, financing costs, and earnings expectations. Geopolitical tensions can deepen this mismatch because conflicts influence inflation and interest rates, transmitting rapidly through markets even as industrial development proceeds slowly. [para. 1][para. 2]
2. Investors price expected cash flows, not just industrial progress. Previously, enthusiasm for AI's growth potential supported valuations, and large capital expenditures were seen as evidence of strong demand. Now, the emphasis has shifted to when those investments will generate returns. This shift alters the market's pricing framework, though the industry's long-term trajectory has not necessarily changed. With elevated expectations, substantial accumulated gains, and mounting risk, markets are highly sensitive to disappointment; even strong earnings results may fail to support share prices if they fall short of expectations. [para. 3][para. 4]
3. These dynamics are particularly pronounced in China's A-share market. After a sharp rally, concentrated institutional holdings can amplify a reversal, as efforts to secure profits, limit drawdowns, and meet redemptions reinforce one another, potentially turning a correction into a deeper decline. Investors navigating these fast-moving forces require rational analysis, valuation discipline, and a long-term perspective. [para. 5][para. 6]
4. A common error is conflating three distinct judgments: whether an industry has promising prospects, whether a company is well positioned, and whether its shares are worth buying. Believing AI will transform the economy is an industry judgment; expecting a specific company to lead is a business judgment. Neither establishes that the stock is attractive at its current price, which requires comparing the price against a reasoned estimate of intrinsic value. Not every company in a growing sector is worth owning, and an excellent company can be a poor investment at an excessive valuation. Mindful investing resists short-term sentiment and lets valuation constrain enthusiasm for technology. [para. 7][para. 8][para. 9]
5. After a severe correction, views often split into two extremes: that the boom is over or that every decline is a buying opportunity. Neither is sufficient. A more useful response is to examine portfolios closely, asking whether each company has a durable competitive advantage, how much future growth is already reflected in valuation, whether holdings are excessively concentrated, and whether funding and liquidity can withstand further losses. The essential questions remain focused on the industry's development stage and which companies can translate growth into sustainable profits and cash flows. Over time, industrial development and financial expectations may converge, but the timing and path must be tested against operating results and real-world evidence. [para. 10][para. 11][para. 12]
6. Three principles help maintain discipline: acceptance, non-judgment, and patience. Acceptance means recognizing the correction has occurred; denying it allows emotion to displace analysis, encouraging panic selling or indiscriminate buying. Non-judgment involves avoiding premature conclusions that the sell-off is irrational or excessive, staying open to evidence rather than rushing to defend a position. Patience is not an obligation to hold losing investments indefinitely, but rather following a reasoned strategy while allowing time for its underlying assumptions to be tested. A long-term approach rests on thorough research, an understanding of what merits continued ownership, and a willingness to change course when evidence changes, helping investors navigate the technology sector's growing pains without losing sight of long-term opportunities or near-term risks. [para. 13][para. 14][para. 15][para. 16][para. 17]
7. The article is authored by Yang Jun, a veteran financier who previously worked at Shanghai Pudong Development Bank and later served as chief risk executive at Lufax Holding, deputy chief risk officer at Ping An Group, and vice president of Tencent Financial Technology. The views expressed in the article are his own and do not necessarily reflect Caixin's positions. [para. 18][para. 19]
AI generated, for reference only
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