The AI Rally Broadens: Capital Flows Toward Upstream ‘Shovel Sellers’
The first half of the year has been dominated by a clear structural trend in the A-share market, with the AI-driven technology sector leading the charge. Indices like the ChiNext and STAR 50 have significantly outperformed, painting a vivid picture of the AI supply chain as the central narrative.
From Crowded Trades to New Valuations
Volatility within the AI sector picked up notably in Q2. A key observation is that early leaders—such as semiconductors, optical modules, and PCBs—have seen trading congestion reach historically high levels. Market enthusiasm is now seeking fresh ground.
A subtle shift in capital flow is underway. Momentum is gradually spreading upstream to the raw material and infrastructure segments that provide the essential ‘tools’ for AI model development and computing power build-out, catching the eye of discerning investors.
Which Upstream Sectors Are Gaining Traction?
This broadening trend is already visible in the market performance of several upstream niches. Specifically, the following areas are drawing increased attention:
- Minor Metals: Critical components for high-end electronic components and semiconductor materials, their demand is tightly linked to the expansion of AI hardware capacity.
- Electronic Fabric: A core substrate for manufacturing high-performance PCBs, directly benefiting from upgrade cycles in computing infrastructure like servers and data centers.
- Optical Fiber: The physical backbone for high-speed data transmission, an indispensable piece of infrastructure in an era of explosive AI-driven data growth.
These sectors share a common thread: they reside further upstream in the AI value chain, offer more attractive valuations compared to core hardware segments, and currently exhibit healthier trading dynamics.
Style Rotation or Theme Broadening?
CICC's report provides a clear perspective on this market evolution. The analysis suggests that, against the backdrop of a strengthening and definitive AI industry trend, the current phase is better characterized as a ‘style diffusion’ within the theme rather than a wholesale ‘systematic style rotation’.
This implies the AI thesis remains intact as the market's core driver. However, investor focus is extending deeper into the foundational layers of the supply chain to uncover value not yet fully priced in. Consequently, these upstream ‘shovel-selling’ segments have emerged as new areas of interest and potential value pockets in the current market landscape.