In recent weeks, the Chinese technology market has witnessed significant fluctuations, reflecting both optimistic growth and subsequent correctionsAfter nearly a month of continuous escalation, prominent Chinese tech stocks have begun to retractThis decline was evident on February 25, when the Hang Seng Technology Index dipped by 1.60%, with the primary Hang Seng Index itself dropping by 1.32%. Notably, major players like Alibaba and Tencent saw their stocks fall by 3.76% and 2.49%, respectivelySimilarly, A-share market stocks such as ZTE, SMIC, iFlytek, and Northern Huachuang also experienced declines exceeding 2%.

This market downturn was partly triggered by external factors, including U.S. trade policies, economic deceleration, and inflation data, which have taken a toll on U.S. stocks and consequently influenced Chinese concept stocks negativelyThe Direxion Daily China Bull 3X Shares ETF (YINN) experienced a significant decline of 10.04%, indicating investors' cautious sentiments toward leveraged productsThe iShares MSCI China ETF (MCHI) fell by 3.91%, while the NASDAQ Golden Dragon China Index (HXC) and the Wind Chinese Technology Leaders Index (DRAG) witnessed sharper declines of 5.24% and 6.77% respectively.

Such trends have sparked concern among investors regarding the sustainability of the narrative surrounding asset re-evaluation driven by DeepSeek technologiesFinancial institution Citic Securities noted in a recent report that current sentiment and technical indicators have become overstretchedThey emphasized the necessity for catalytic events to spur market upward movement in an environment where macroeconomic narratives remain uncertain for the long term.

Since mid-January, characterized by the rise of tech champions represented by DeepSeek, Chinese stocks performed remarkably well, reflecting an overall market recoveryMajor financial institutions such as Goldman Sachs, JP Morgan, UBS, Deutsche Bank, and Morgan Stanley have released bullish reports on Chinese assets

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However, as valuations have continued to ascend, voices advocating for a more rational approach to trading have emerged.

A recent report from Citic highlights that since the post-Spring Festival rebound on February 3, the Hang Seng Technology Index had experienced a cumulative increase of 24%, marking a technical bull market with a rise exceeding 20%. Nonetheless, the breadth of this rally was notably narrow, primarily driven by just a few tech stocks rather than widespread participation.

Market analysts attribute this rally to optimistic sentiment surrounding technological trends, leading to a structurally driven market, as opposed to macroeconomic policies that supported broader market movements in past recoveriesDespite the correct general direction of the macro narrative, the level of incorporation of future expectations significantly influences how different investors assess available growth opportunities.

Short-term perspectives from investment professionals indicate that while market sentiment and risk appetite are currently elevated, the crowded trades in technology assets may lead to volatility due to profit-taking and increased purchases from cash-rich investorsSigns of market exhaustion began to appear around February 17, as the Hang Seng Technology Index suffered consecutive losses, while the NASDAQ Golden Dragon China Index dropped over two consecutive days.

The situation persisted until February 20, when Alibaba reported a 11% increase in the overall revenue of its cloud business, with AI-related products seeing impressive triple-digit growth for six consecutive quartersThis revelation invigorated the market, spurring a rally in "China tech stocks" and Hong Kong tech equitiesOn February 21, the Hang Seng Technology Index surged 6.53%, with Alibaba soaring 14.56%, and the NASDAQ Golden Dragon China Index, along with the Wind Chinese Technology Leaders Index, also witnessing increases of 1.65% and 3.14%, respectively.

Yet, as the earnings season unfolded, uncertainties re-emerged

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On February 24, popular Chinese concept stocks faced widespread declinesAlibaba, Bilibili, Futu Holdings, and Pinduoduo all experienced significant drops, indicating a divergence in performance within the tech sectorDespite the bearish trends for some companies, smart vehicle manufacturers like Xiaomi and Li Auto defied the overall market downturn, demonstrating gains of 3.10% and 12.52% respectively.

Li Auto announced that its upcoming pure electric SUV, the i8, is in the final stages of production and will officially debut at the Shanghai Auto Show on April 23. Meanwhile, Xiaomi’s founder Lei Jun revealed plans to launch the company's most premium offerings yet, further highlighting the brand's ambition to maintain rapid growth, targeting a company growth rate exceeding 30% in 2024 and continuing in 2025.

Looking forward, industry experts underscore that the trajectory of Chinese tech stocks will closely correlate with the upcoming financial results of major companies in the sectorChen Gang, co-director of the research department at Everbright Securities, noted recent fluctuations in related concepts and cautioned that static exhaustion may necessitate further catalysts to secure a sustainable recovery.

In light of the deepening macro narrative and ongoing technological shifts spurred by DeepSeek advancements, the question remains: how long will the bull market powered by AI persist? Both domestic and foreign institutions remain cautiously optimisticRecently, Morgan Stanley adjusted its stance on the Chinese stock market to "equal weight," reflecting a positive outlook for the market's recoveryTargets were updated for various indices, signaling sustained confidence in China's economic and market trajectory.

JP Morgan's analysis echoed similar sentiments, speculating that despite the challenges in predicting the duration of AI-driven stock rallies, the changes in fundamental valuation brought about by transformative trends are likely to be lasting

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