How should the recent correction in growth and technology stocks be interpreted? Assuming the wheels of industrial progress continue to turn forward, what magnitude and duration of adjustment must technology investments endure?

Historical cases from the A-share market indicate that if the underlying industrial trend is not ending, corrections occurring within a bull market due to various factors typically last around 21 trading days, with a decline of approximately 19%. Adjustments in the U.S. stock market show a similar magnitude of decline but a longer duration.

Based on empirical evidence, the current correction in the A-share technology sector has been relatively sufficient in terms of price decline, though the adjustment period may still be slightly shorter than historical patterns. From a medium-term perspective, AI investments are likely to follow a "two steps forward, one step back" upward trajectory in sync with industrial progress—such as model upgrades, hardware iteration, token explosions, and earnings guidance. This pattern suggests a healthier and more sustainable long-term trend.

This dynamic is significantly different from the 2015 ChiNext "leverage-driven bull market" or the late-1990s dot-com bubble. The 2015 episode involved a "one-time shock" from rapid inflows of leveraged capital, which was quickly invalidated by the crackdown on margin financing in June 2015. The late-stage dot-com bubble was propped up by the Y2K narrative—a demand-side "one-time shock"—making its later phase resemble a "one-off deal" that透支 future Y2K demand. It proceeded without verification or caution regarding short-term fundamentals and was swiftly invalidated as the new millennium arrived. In both cases, once the one-time shocks passed, the bursting of the bubbles seemed almost inevitable.

Returning to the present, this round of AI industrial investment is characterized by highly integrated global capital markets and deep participation from various investor types. Consequently, the tracking and discussion of industrial progress are much more intensive. There is no grand narrative like the 1999 "Y2K" scare to support overly optimistic demand projections, nor is there the extreme leverage seen in the 2015 A-share market. Industry participants are scrutinizing demand, capital expenditure, and returns almost "frame by frame." Corrections stemming from disagreements can be followed by renewed momentum once the industrial trend is confirmed.

Whether in U.S. or A-shares, the next earnings season is approaching. Many recent disputes and divergences regarding the industry level will find more verification clues during this reporting period. After short-term emotional fluctuations, returning to rational fundamental tracking and verification is paramount.

Historical A-Share Growth Themes: Duration and Depth of Corrections

Historically, major thematic rallies in A-shares often undergo a process of "trend - consolidation - trend continuation/trend termination." If a trending sector breaks below its 20-day moving average by more than 5%, the rally is highly likely to enter a consolidation phase.

After such a trend break, whether it leads to consolidation or termination is primarily determined by the underlying industrial trend itself. If the industrial momentum and prosperity continue, the sector can consolidate, digest gains, and resume its rise after waiting for earnings confirmation.

Experience from 35 adjustments across 13 major themes since 2012 shows an average correction lasting 21 trading days with a 19% decline. After adjusting for volatility, the magnitude of a high-level correction is approximately five times the average K-line size of the past month. Even with the increased proportion of quantitative trading, the correction magnitudes for major themes remain applicable and have not shown a systematic increase.

Based on the chart analysis, the current correction in the A-share technology sector is already largely consistent with the empirical decline seen in case studies. The main difference is the rapid speed of the adjustment, which may mean insufficient time for digestion. Patience is required, alongside a respectful vigilance towards the industrial trend.

U.S. Market Experience with Growth Sector Corrections

Since 2023, on average, corrections have lasted 40 trading days. The S&P 500, Nasdaq, the "MAG7" stocks, and the Philadelphia Semiconductor Index (SOX) have seen average declines of -8.8%, -12.0%, -13.4%, and -17.6%, respectively.

In the current correction, the SOX has experienced a maximum decline of around 16% since late June, which is already close to the average decline magnitude. However, from a time perspective, it may still require a further period of digestion.

Risk Factors to Consider

Geopolitical conflicts exceeding expectations, leading to higher-than-anticipated global inflationary pressures; overseas inflation and U.S. economic resilience causing global liquidity to enter a tightening cycle more rapidly than expected; domestic economic stabilization measures falling short of expectations, resulting in weak economic recovery and a downturn in market risk appetite.