July saw one out of every 20 stocks lose half its value, with nearly half coming from the electronics and communications sectors. As the month of July draws to a close in the A-share market, a sweeping correction across the tech sector is driving the extreme rally from June into a sharp reversal. By the close on July 28, among the 5,325 non-ST stocks on the A-share market, 271 had seen a maximum drawdown of over 50% from their June highs, with share prices effectively "halved."

Among these, the electronics and communications technology sectors contributed a combined 114 stocks that were cut in half, accounting for more than 40% of the total, making them the hardest hit areas of this correction. Even market leaders with market capitalizations in the hundreds of billions were not spared. Semiconductor leader GigaDevice Semiconductor (603986.SH) saw a drawdown of over 53%, while other tech giants like Longsys Electronics (301308.SZ), Tianfu Communication (300394.SZ), Hengtong Optic-Electric (600487.SH), and Zhongtian Technologies (600522.SH) generally fell by more than 50%. Yangtze Optical Fibre and Cable (601869.SH) also approached the 50% drawdown threshold. From a solitary standout in June to a violent sell-off in July, the tech rally is undergoing an unprecedented deleveraging process, and the curtain has risen on a market style rebalancing.

July saw 271 stocks "halved," with the tech sector being the epicenter of the correction. Data from Yicai shows that by July 28, after excluding ST stocks, 271 of the 5,325 A-shares had a maximum drawdown of over 50% from their June highs, representing about 5.1% of the total. This correction began in early July, meaning that within just 21 trading days, one out of every 20 stocks saw its price drop by more than half. By industry, the electronics sector topped the list with 94 stocks halved, while the communications sector ranked fifth with 20 stocks. Together, these two tech sectors contributed 114 halved stocks, accounting for 42.1% of all such stocks, underscoring the severity of the tech sector adjustment. Other sectors followed, with machinery and equipment having 41 stocks halved, basic chemicals 31, power equipment 23, non-ferrous metals 10, computers 9, building materials 7, national defense and military 6, and pharmaceuticals and biology 5, indicating that the correction has spread from tech to cyclical and manufacturing sectors.

Market leaders with a market cap over 100 billion yuan were not immune. Statistics show that a total of 11 stocks with a market cap over 100 billion yuan saw a drawdown exceeding 50%, with tech stocks occupying 7 of those slots. GigaDevice, with a market cap of 274.1 billion yuan, had a drawdown of 53.86%, making it the most heavily impacted among tech stocks by market cap. Tianfu Communication, a core player in optical modules with a market cap of 198 billion yuan, saw a drawdown of 51.50%. PCB leader Victory Giant Technology (300476.SZ) saw its share price fall from 402.6 yuan to a low of 191 yuan, a drawdown of about 52.6%. Additionally, Longsys had a drawdown of 55.99%; semiconductor material company Xi'an Yicai-U saw a drawdown of 57.46%; and fiber optic cable giants Hengtong Optic-Electric and Zhongtian Technologies experienced drawdowns of 59.95% and 55.74%, respectively.

A broad sell-off hit the entire tech sector, with semiconductors experiencing a particularly brutal wave of selling. Looking at the overall drawdown, the electronics sector saw an average drawdown of 39.48%, and the communications sector averaged 32.50%, both significantly higher than the overall market average of 25.27%. Among the 27 stocks with a drawdown of over 60%, 8 were from electronics and 4 from communications, highlighting the unique depth and intensity of the tech sector's correction. Within the tech sector, the semiconductor segment bore the brunt of the drawdown in the electronics industry, with 33 stocks experiencing a drawdown of over 50%, the highest number of halved stocks within the electronics sector. The memory chip segment was almost completely devastated: companies in the storage industry chain like GigaDevice, Longsys, Demingli (drawdown 63.12%), Beijing Ingeling (drawdown 54.52%), and Pran (drawdown 66.56%) were all halved. Furthermore, companies in semiconductor silicon wafers and equipment parts, such as Shandong Tianyue Advanced Materials (688234.SH), Kema Technology (301611.SZ), Liangmeng Wei (605358.SH), and Goke Microelectronics (300672.SZ), also fell by over 50%.

The electronic components sector also saw sharp adjustments, with 20 stocks falling by over 50%. Companies in copper-clad laminates and PCB materials, such as Nanya New Materials (drawdown 51.31%) and Jin'an Guochi (drawdown 53.92%), saw significant declines. While the drawdowns for PCB giants like Wus Printed Circuit (002463.SZ), Shennan Circuits (002916.SZ), and Shengyi Technology (600183.SH) were less than 50%, they were still substantial at 33.15%, 34.35%, and 40.91%, respectively, indicating the severity of the adjustment. The optical communication industry chain showed relative resilience in the first half of July, but as related U.S. stocks experienced significant pullbacks, leading A-share companies in this sector also underwent deep corrections. Of the 20 halved stocks in the communications industry, 19 were in the communication equipment field. Besides the three major giants Tianfu Communication, Hengtong Optic-Electric, and Zhongtian Technologies, other optical communication chain companies like FiberHome Telecommunication Technologies (600498.SH), Yongding Shares (600105.SH), Shijia Photonics (688313.SH), and Changxin Bochuang (300548.SZ) all fell by more than 50%. Changyingtong (688143.SH) saw an even steeper drawdown of 64.32%. Although the two major optical module leaders, Zhongji Innolight (300308.SZ) and Eoptolink Technology (300502.SZ), were not halved, their drawdowns reached 35.92% and 34.25%, respectively, with a combined market value evaporation of over 600 billion yuan.

Notably, all seven halved stocks in the building materials industry are concentrated in the glass fiber sector. As a core upstream material for electronic-grade copper-clad laminates, fiberglass is highly correlated with the PCB and semiconductor industry chains, meaning pressure from the tech down-cycle is transmitting upstream. Two giants with market caps over 100 billion yuan, China Jushi (600176.SH) and Honghe Technology (603256.SH), saw drawdowns of 51.31% and 51.11%, respectively, while SinoTech Materials (002080.SZ) also experienced a halving.

The nearly month-long decline, which lacked any significant rebound, is not due to a single factor but is the result of a triple resonance of valuation, positioning, and industry logic. The frenzied rally in tech stocks during June itself laid the groundwork for the July correction. Stocks in the AI computing infrastructure chain, represented by memory chips, optical communication, and PCBs, generally hit all-time highs in June, rapidly becoming overvalued. Memory leaders like GigaDevice and Longsys commonly rose by over 50% in June alone, with some stocks even doubling. The excessive short-term gains and high valuations made any marginal change a potential trigger for concentrated profit-taking. At the same time, this correction has a distinct global character. Since July, U.S. tech stocks have also experienced deep corrections, with memory giants like Micron and Sandisk seeing significant price drops, and South Korea's Samsung Electronics and SK Hynix also weakening. The crowding of global AI trades has entered a digestion phase, with AI-related segments generally undergoing deleveraging and a process of reducing trade congestion. A-share tech stocks could not remain immune.

When the crowding of "silicon-based trades" reached historical extremes, market focus shifted from "capital expenditure growth rates" to the ability to realize returns on capital. Although Google's earnings exceeded expectations—with higher capital expenditure and better-than-expected cloud revenue—the entire AI infrastructure chain continued to face pressure, confirming this logic shift. Similarly, news of smooth mass production progress for Nvidia's next-generation Vera Rubin server system failed to drive the sector's valuations higher, indicating a lack of strong catalysts. Domestic optical module leader Eoptolink disclosed its semi-annual results, showing profits significantly exceeding market expectations, yet its secondary market share price reacted negatively. This suggests that current-period performance is no longer the core pricing contradiction for the sector.

The competitive landscape in the large model space is also reshaping expectations. The release of Kimi K3 set a new high for pricing of domestic large models, signaling an end to the era of low-price competition. However, model stocks in the Hong Kong market experienced sharp corrections during the same period, with Zhipu's stock price falling 70% in the past month and MiniMax's stock price plummeting 86% from its March high. This reveals the market's deep-seated concerns about the long-term moats and sustainable profitability of large model companies being released in a concentrated manner.

Regarding this correction, many institutions generally believe that the July tech sell-off is a correction of the extreme June rally. When all funds rush in the same direction, risk accumulates quietly. When the rally collapses and style rebalancing begins, the market's resilience actually strengthens, and the A-share market is expected to emerge from this period with a more balanced style. An investment director from a Shanghai private equity fund stated that the extreme concentration of funds in tech stocks in June was unsustainable. "When everyone is crowded onto one ship, it's bound to capsize sooner or later." He believes the July adjustment is essentially a rebalancing of positioning structures, a correction of the previous overcrowded trades. "But this does not mean the end of the tech rally," the private equity source emphasized. "The medium- to long-term logic for the AI industry remains unchanged. The market is just moving from a phase of 'broad-based gains' to 'selective stock picking.' In August, with the release of interim reports, companies with genuine earnings support will re-emerge, while purely concept-driven stocks may continue to be marginalized. Low-positioned sectors like cyclical, consumer, and dividend stocks are expected to gain incremental allocation during the capital rebalancing process."

Caitong Securities believes the A-share market has initially stabilized but still needs to wait for a trend-following rally opportunity. From a positioning perspective, the previous sell-off in AI tech has come to a halt, and style rebalancing is complete. From a market sentiment perspective, the previous panic has reversed, and bullish sentiment is brewing. From a capital flow perspective, around July 20, stock ETFs saw sustained net large subscriptions, with capital deploying against the trend, solidifying the market's bottom foundation. The institution predicts that the daily chart is more likely to form a "W-shaped" bottom around the end of July. In terms of timing, driven by factors such as the completion of interim report disclosures by the end of August, a high-level Chinese official's visit to the U.S., and the approaching U.S. midterm elections in November, the A-share market index may enter a favorable window for another rally from late August to the end of October.

CITIC Securities also believes the market will maintain a W-shaped bottom consolidation in the short term. AI remains a long-term theme, and in the short term, it is advisable to wait for external uncertainties to clear while simultaneously advancing structural rebalancing, focusing on low-positioned areas with fundamental support and significant valuation repair elasticity. The institution emphasizes that tech remains a medium- to long-term theme, and structural rebalancing should be advanced simultaneously. In terms of direction selection, priority should be given to upstream material and equipment sectors, as well as domestic computing power, which have strong earnings and order certainty and high profit realization capabilities.