Zhongtai: Adhere to the mainline of technology and do not waver, the storage and CPU sectors have little room for downward adjustment.

Zhongtai released a research report stating that the recent market downturn pressure comes from the clearance of trading chips structure, and the impact from the trading structure is only temporary. It is important to hold onto the technology main line without wavering. The most significant short-term catalyst is still from domestic chains. The pricing space in the middle and downstream is more ample. In addition to the short-term catalyst of ChangXin's listing, emphasis should be placed on semiconductor equipment, innovation chips, advanced packaging and testing, and downstream applications. The logic of overseas chains comes from the mapping between China and the United States. With the stabilization of related sectors in the U.S. stock market, there is limited downward adjustment space for storage and CPU in A-shares, and late July may be a "buy-the-dip" opportunity. Last week, A-shares experienced a great deal of ups and downs, with the first three days in a state of dormancy, technology making a strong comeback on Thursday, and a dive back on Friday. From a sharp drop, rebound, to dive, a continuous reversal expectation occurred in a short period of time. Behind the ups and downs, it once again verified that technology remains the strongest in terms of profit-making effects. Even on Friday, when funds temporarily left the technology sector, they chose more catalytic commercial aerospace sectors rather than undervalued traditional sectors. Looking at the week as a whole, the Science and Innovation 50 Index had the best performance among broad-based indexes (+4.52%), and domestic chains also trended towards stabilization, with innovation chips (+4.13%) and semiconductor equipment (2.37%) showing good performance. The premise for whether the profit-making effect can be sustained is the answer to the question of "why did the market fall"? Since June, the rapid rise of technology has brought a large amount of momentum strategy investment funds with a "if you can't beat them, join them" mentality, resulting in a complex trading chip structure. In an environment where the sentiment of stock game intensified: once there is an increase, there is fund redemption to cash in on floating profits. Last week, there were several instances of significant dives after rebounds. While the trading chip structure is being digested, there is also a significant influx of incremental funds actively entering the market. Last week, there was a significant net purchase of Science and Innovation ETFs, with a net purchase of 25.508 billion yuan for semiconductor equipment and 5.097 billion yuan for innovation chips, with most of the purchases occurring on Thursday and Friday. The rotation and stabilization of the U.S. stock market have already provided an answer. From mid-May to the end of June, AI hardware (storage, CPU) was strong in the U.S. stock market, while software and GPU were weak. Reversal began at the end of June, with hardware weakening and software and GPU stabilizing one after the other. Storage and Philadelphia Semiconductor began to rebound in the night market on Wednesday last week, with SK Hynix rising by 12.76% on its first day of listing. Even the resurgence of waves following the ceasefire between the U.S. and Iran did not prevent the rebound of U.S. technology stocks, verifying that the logic of the technology industry has not reversed. The twists and turns since July once again verify that the success rate of balanced strategies is not high, and a focus on technology is more likely to yield profits. If the adjustment in early July made investors reconsider the need for balanced allocation in technology, then last week's market once again showed that industry allocation can occur within technology, rather than between technology and other sectors. After a brief rebound, undervalued traditional value sectors quickly weakened again, while the adjustment in technology was relatively short-lived, with a rebound already taking place last week. Whether it is since mid-May (when there was a divergence of opinions on the technology trend and calls for balanced strategies) or from early July until now, the returns of technology and non-technology sectors show that there is no excess return from selecting industries outside of technology for balanced allocation. Technology has a high growth slope but also means it is a high volatility asset. When technology is the direction to hold onto, funds can be allocated to high-dividend individual stocks while keeping a tight hold on technology. Zhongtai previously proposed in the mid-term outlook "Broaden Horizons for Leap" that for absolute return institutions, they can gradually focus on individual stocks with dividends rates greater than 6% (opportunities outside of sectors). Backtesting data showed that this combination has effectively smoothed out volatility during the high volatility period in technology since July.