“In the stock market, AI will be an epic opportunity.”
A fund manager at Wanji Asset Management worried he was missing the rally and bought AI stocks in recent weeks, after cutting exposure to new energy in February.
According to data provided by Cinda Securities, TMT-focused ETFs have attracted net inflows of 4 billion yuan ($580 million) over the past three months, representing some of the greatest such buying in any sector.
But, the frenzy is sucking up enough money to pose larger hazards as broader market gains weaken and worries linger over the robustness of China’s recovery from the COVID-19 outbreak. Despite a warning in February from official media, the pattern has continued.
“The siphon effect of the TMT sector has become increasingly obvious,” said Guosheng Securities analysts in a note, while others pointed to fundamentals that appear shaky.
After posting losses every year since 2017, chipmaker Cambricon Technologies Inc has seen its share price triple, increasing its market value to over $10 billion.
After warning investors that it has not seen a significant order increase provided by AI-generated content, shares of Beijing Haitian Ruisheng Science Technology have doubled (AIGC).“The AIGC trade is obviously overheated,” said Yao Pei, chief strategist at Hua Chuang Securities.”
Despite the initial market failure, others believe winners will emerge because of China’s government’s encouragement of technological innovation.
Yuan Yuwei, fund manager at Water Wisdom Asset Management said-
“Most companies that surged in the frenzy are junk stocks, which lack long-term value, and the investments are merely Ponzi schemes.The junk shares will certainly slump, then we will see real industry leaders emerge.”
There are 6.8891 Chinese yuan in one dollar.
