After the Spring Festival holiday, the A-share market experiences a surge in what is often referred to as the "technology bull" market, capturing the attention of investorsA significant influx of capital has been directed towards fields such as robotics and artificial intelligence (AI) conceptsBy the market close on February 20, 26 individual stocks had already doubled in value in the year leading up to 2025.

The rise of technology stocks has been notable over recent days, and research data indicates that the trading congestion in the innovation index is nearing historical highsWhile the long-term industrial trend remains strong, analysts express concerns about a potential emotional pullback leading to significant market divergence in the short term.

The Science and Technology Innovation Board (STAR Market) has become the focal point of discussions regarding the “technology bull” marketThis board is characterized by the Science and Technology Innovation Comprehensive Index (000680.SH), which covers over 97% of the stocks listed on the STAR Market in terms of both quantity and market capitalizationThis comprehensive index fills the gap left by the Sci-Tech 50, Sci-Tech 100, and Sci-Tech 200 indices, which do not fully capture the small and mid-cap stocksRecently, 13 public funds including Penghua, E-Fund, and Huaxia launched ETFs based on this comprehensive index, bringing in over 10 billion yuan in additional capitalThis influx is poised to influence the current trend favoring small-cap and growth-focused technology stocks.

The trading congestion in the “technology bull” market has reached historical highsOn February 20, there was a notable expansion in the AI sector, with stocks related to AI glasses particularly surgingCompanies such as Stars Technology (300256.SZ), Doctor Glasses (300622.SZ), Jiemite (300868.SZ), Mingyue Lenses (301101.SZ), and Zhuoyue Technology (002369.SZ) all hit their upper trading limitsAdditionally, humanoid robot stocks have also been active, with Shenfeng Intelligent (300276.SZ) achieving a consecutive “20cm” upward limit for two trading days, and Hangzhi Qianjin (601177.SH) enjoying seven consecutive trading limit increases.

Entering 2025, the Chinese AI industry is witnessing a succession of critical events, and robotic technologies are advancing at unprecedented speeds

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Coupled with an economic recovery cycle, this backdrop facilitates a modest rise in the main stock indices while technology sectors yield excess returnsVarious sub-sectors of AI, such as cloud computing, IDC, AI processing power, and AI applications, have all experienced broad-based increases, with funding consistently discovering new opportunities in the detailed components of humanoid robots.

As of the close on February 20, the Sci-Tech 200 Index and the Sci-Tech 100 Index saw gains of 14.61% and 12.37%, respectively, ranking as the second and third highest increases among all A-share indicesIn terms of concept sectors, the broader categories of robotics and AI have dominated the top gainers, with the DeepSeek Index rising by 68.43% since the beginning of the year, leading the markets; Yushu Robotics, cloud computing, and humanoid robot stocks each rose over 30%.

Looking back, since the "924" bull market, technology stocks have consistently shown superior performanceThe cumulative increase in the Sci-Tech 200 Index has reached 73.04%, with a maximum drawdown of approximately 21%, demonstrating resilience and significantly outpacing both the Shanghai Composite Index and the Shenzhen Composite Index.

However, the continuous speculation has heightened trading congestion within the technology sectorAccording to a report from Zhongtai Securities, the trading congestion of A-share technology stock indices has hit a historically high level, with the innovative index trading volume accounting for 37%, approaching its historical peak of 41% reached in the fourth quarter of 2024. Still, this level remains notably lower than that of the Nasdaq (63%) and Hong Kong’s Hang Seng Tech Index (51%). When comparing core index valuations, the price-to-earnings ratio (PE) of the Sci-Tech 50 stands at 87 times, placing it in the 98th percentile for the past decade, while the growth board index has a slightly elevated PE of 35 times, falling within the 22nd percentile of the last ten years.

Experts suggest that the post-holiday market trends are driven more by spontaneous market forces than the uniform rises witnessed through late September of the previous year

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This change correlates closely with China achieving world-class breakthroughs in the field of artificial intelligenceA comparison of the movements of A-shares with Hong Kong stocks following January 13 illustrates this shiftExcluding the contributions of the Hang Seng Tech Index, Hong Kong stocks have only gained less than 5%, while leading tech firms have driven the majority of market growth.

From a trading perspective and in terms of valuation, many in the investment sector state that A-share technology stocks have entered a phase of high valuationIn the medium term, it is anticipated that technology will continue to provide returns, although the extent of growth will depend on the inflow of new capital and the degree of consensus reached within the market.

The re-evaluation of technological asset values necessitates new capital influxGenerally, A-share technology trends are more pronounced during periods of heightened risk appetite in the marketSome analysts' reports have begun to speculate whether the current policy momentum could prompt a re-evaluation of asset valuations across China’s capital markets.

One market analyst observed that the momentum in A-shares is largely driven by valuation increases stemming from ample liquidityThe new capital influx is expected from two key areas: Firstly, foreign investment is set to increase, considering the current relatively low ratio of global investor allocation in A-shares, which leaves approximately three percentage points of potential reallocation to reach historical averagesThe emergence of DeepSeek has enhanced the investability of Chinese tech companies, positioning A-share technology as a significant target for global investor allocationsSecondly, local institutions are also expected to provide additional capital for allocations.

Recently, the first batch of 13 ETFs tracking the Sci-Tech Comprehensive Index have seen concentrated issuance, with each fund having a fundraising cap of 2 billion yuan; they have collectively surpassed 10 billion yuan in raised funds, drawing considerable market attention due to the liquidity they bring to the STAR Market.

In contrast to the Sci-Tech 50, Sci-Tech 100, and Sci-Tech 200 indices, which have specific selection criteria, the Sci-Tech Comprehensive Index represents a broader view of the overall performance of all publicly listed companies on the STAR Market, including large, medium, and small-cap stocks

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Moreover, the top ten weighted stocks in the Sci-Tech Comprehensive Index account for only 23.64% of the index, significantly lower than the 58% of the Sci-Tech 50 IndexThe median market capitalization of the constituent stocks is around 5.2 billion yuan, indicating a greater inclination towards mid- and small-cap profiles, as opposed to the more mature focus of the Sci-Tech 50. With the current trend favoring small-cap and growth stocks, these smaller companies within the STAR Market may see increased interest as new capital enters.

Guotai Junan has recently noted that the year 2025 will solidify the lead of technology as the main investment themeThis is drawing parallels to the "Internet Plus" concept, as China's advancements in AI pave the way for a new wave of capital expenditure across various industriesThe focus will likely shift to tech companies that demonstrate both the willingness and capacity for capital investment.

Furthermore, analysts have highlighted that both Yushu Robotics and DeepSeek have bolstered global investor confidence in the re-evaluation of the value of Chinese technology assetsAmidst macroeconomic conditions, industry trends, funding environments, and shifts in market dynamics, when emotional sentiment temporarily drives up valuations, the market's center of gravity is expected to return to the core factors of the industry, such as earnings realization, competitive landscapes, and industry cyclesInvestors are advised to take note of leading enterprises in undervalued sectors, as the fundamental aspects of the technology market may easily become overlooked, yet have the potential to become a hidden focal point.