Why are U.S. tech stocks hitting new highs while A-share tech stocks are plunging? | October 13

On the morning of October 13, China’s three major stock indices opened lower across the board: the Shanghai Composite Index opened down 0.96%, and the ChiNext Index opened down 2.18%; at the opening, 4,884 A-share stocks were trading lower. The ChiNext Index plunged over 3% intraday, with computing infrastructure hardware, semiconductors, and optical communications leading the declines. Meanwhile, the Nasdaq just hit a new all-time high last week, rising approximately 32% year-to-date. Although AI is the dominant theme driving tech rallies on both sides of the Pacific, the real divergence lies not in AI itself—but in whether the respective tech stocks are backed by earnings or merely by narratives. U.S. tech stocks are rising on realized profits; A-share tech stocks are falling as overly optimistic expectations—priced in too early—unwind. I. One side hits new highs; the other experiences a stampede The current U.S. rally is fundamentally solid. On October 5, the Nasdaq touched 27,450 points intraday—a new record—and the S&P 500 breached 7,800 for the first time. Leading the gains were AI-benefiting giants like NVIDIA and Microsoft. Last Friday, amid tariff-related news, U.S. equities saw a sharp pullback: both the S&P 500 and Nasdaq posted their largest single-day declines since April, and the Nasdaq Golden Dragon China Index fell 6.1% in one day. Yet on Monday (U.S. Eastern Time, October 12), the Nasdaq declined only 0.44%—a minor correction within its broader upward trajectory, leaving it still near record highs. Structurally, however, one detail warrants attention: on Monday, the Philadelphia Semiconductor Index fell 2.67%—its second consecutive decline—and Lumentum, an optical communications leader, plunged over 10% in a single day, while Meta and Microsoft continued to rise. Even within the broader uptrend, U.S. tech stocks are quietly diverging: profitable mega-cap firms hold steady at elevated levels, whereas segments heavy on narrative but light on earnings—precisely those overlapping most with A-share tech—are beginning to retreat. In contrast, A-shares’ recent selloff began on the first trading day after the National Day holiday: on October 8, the ChiNext Index dropped 3.15% and the STAR Market Composite Index fell 4.55%. Thereafter, CPO (co-packaged optics), optical modules, and computing infrastructure led the declines. By October 12, the communications sector plunged 4.49%—the steepest drop among all sectors—and 800 TMT stocks hit 20-day lows, accounting for 64.5% of the sector. Under the same global tech cycle, U.S. tech stocks advance while A-share tech stocks suffer a stampede—not because their directional outlooks differ, but because the specific companies driving each market’s performance are fundamentally different. II. The root of divergence: one rallies on earnings, the other on expectations The engine behind the U.S. market’s new highs is the genuine earnings of a select few mega-caps: NVIDIA’s chips remain in short supply; Microsoft’s capital expenditures have directly translated into cloud revenue growth; Micron’s latest earnings report vastly exceeded expectations. These firms are rising on the ‘E’—earnings—in their P/E ratios: profits are growing, so valuations remain reasonable. In contrast, only a minority of A-share tech firms have delivered tangible earnings; most rose on speculation and forward-looking expectations—riding the wave of overseas AI enthusiasm and domestic computing infrastructure hype. Earnings-driven assets withstand turbulence; expectation-driven ones collapse at the first gust of wind. Of course, tech stocks are not synonymous with AI stocks. U.S. tech includes consumer electronics (e.g., Apple) and EVs (e.g., Tesla); A-share tech encompasses independent themes such as import substitution, semiconductor equipment, and consumer electronics. Yet AI remains the dominant driver this cycle: U.S. index gains are largely attributable to a handful of AI giants, while the steepest A-share losses are concentrated precisely in the most AI-intensive subsectors—CPO, optical modules, and computing hardware. Other tech subsectors either got caught in cross-sector rotation—for instance, consumer electronics targeted by a U.S. Section 337 investigation—or were dragged down by broad-based sentiment.

A-Share Market Opening Preview: Dow Rises Alone While Nasdaq Leads Declines; Chip and Bank Earnings Reports Deliver Cold Showers on the Same Day

U.S. Market Recap – Previous Trading Day Tuesday, October 13, 2026: Major indices diverged. The Dow Jones Industrial Average closed at 51,850.55, up 195.60 points (+0.38%), supported by energy stocks rallying alongside higher oil prices; investor sentiment remained cautious ahead of upcoming earnings reports. The S&P 500 closed at 7,807.24, down 4.30 points (−0.06%), pressured by semiconductors, memory chips, and optical communications. The Nasdaq closed at 27,245.90, down 120.26 points (−0.44%), weighed down primarily by broad-based selling in memory chips. ・Cross-asset indicators: VIX closed at 15.27, up 0.39%; ・Brent crude rose 1.84% to USD 106.65 per barrel; ・10-year U.S. Treasury yield stood at 5.217%, down 0.44% month-on-month. Major Events – Onshore & Offshore U.S. semiconductor stocks fell collectively, pressured by CXMT’s advancement in novel memory architecture and Broadcom CEO Hock Tan’s warning about diminishing returns from excessive AI lab spending (October 13, 2026, U.S. session). China’s CXMT is advancing next-generation memory architecture, posing competitive threats to U.S. and Korean memory chipmakers; Broadcom’s CEO cautioned that overspending in AI labs may yield poor returns. Market reaction: Micron fell 4.6%, SanDisk dropped 1.7%, Lam Research declined 3.2%, and Applied Materials plunged 7.2%; the Nasdaq fell 0.3%, and the S&P 500 hovered near flat. This was the direct catalyst behind the weakness in tech-heavy weights that day. Conditional impact on A-shares: If this logic persists, overvalued segments—including memory chips and semiconductor equipment—may face concentrated profit-taking. A key confirmation signal would be gap-down openings in related A-share sectors and northbound fund flows out of tech stocks. Continued selloff in chip stocks; Korea/Taiwan/Philadelphia Semiconductor Indices plummeted (October 13, 2026, Asia-Pacific session—prior to U.S. market close) The memory chip selloff triggered concerns over the sustainability of the AI narrative, centered on sudden shifts in supply-side competition and tightening capital chains. Market reaction: Korea’s KOSPI plunged over 5%; the Philadelphia Semiconductor Index retreated more than 7% from its monthly high; Nasdaq futures fell 0.70% pre-market. This chain reaction unfolded first in the Asia-Pacific session, transmitting conditionally to A-shares—though no direct verification occurred that day. U.S. major banks’ Q3 earnings reports showed divergence; Citigroup and Wells Fargo declined (October 13, 2026, pre-market to intraday) Citigroup fell 5.3% due to weaker-than-expected revenue; Wells Fargo dropped 2.6%; Goldman Sachs edged down 0.1%; JPMorgan Chase slipped 0.3%; Johnson & Johnson fell 5.6% on weak sales; UnitedHealth rose its profit forecast yet still declined 0.3%. Another source detailed intraday paths: JPMorgan reported Q3 revenue of USD 50.907 billion and adjusted EPS of USD 5.75—both below consensus—causing its pre-market price to fall over 3%, though it later rebounded to finish nearly 1% higher; Wells Fargo reported revenue of USD 21.87 billion, below the expected USD 22.32 billion, with sharply increased credit loss provisions; the KBW Bank Index has fallen roughly 12% from its August peak. Sector Performance Energy: Bullish direction—no precise daily gain/loss provided; Brent crude rose 1.84% to USD 106.65 per barrel, directly boosting earnings expectations—making energy one of the few sectors rising against the broader market trend.

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Dow Inc. and Nasdaq traded within a narrow range during the morning session on the 13th, reflecting stable market activity for the chemical giant and broader indices.

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