---
title: "Crowded Trades, Valuation Concerns, and Rate Hike Jitters: Is Tech Still Worth Holding?"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/289015930.md"
description: "A shock from non-farm payroll data and a single-day plunge of over 10% in the semiconductor index have swept rate hike fears across the market. However, institutions such as GF Securities and Soochow Securities Co., Ltd. offer a contrarian view: the slope of EPS revisions has not reversed, and AI industry demand continues to expand. Five major historical cases all point to the same conclusion: the true \"killer\" of tech rallies has never been interest rates. The current adjustment in the tech style may represent the optimal window for positioning, with four key events determining the pace of the next phase"
datetime: "2026-06-08T07:21:14.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/289015930.md)
  - [en](https://longbridge.com/en/news/289015930.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/289015930.md)
---

# Crowded Trades, Valuation Concerns, and Rate Hike Jitters: Is Tech Still Worth Holding?

Facing the triple pressure of reignited rate hike expectations, warnings of crowded trades, and valuation controversies, the latest analyses from multiple institutions, including GF Securities and Soochow Securities Co., Ltd., point to the same core conclusion: **The trend of EPS upward revisions and the AI industrial cycle have not been falsified. Various disturbances are largely phased noise rather than sufficient conditions for a mid-term peak in the rally. The tech style remains worth holding, and the adjustment window may present a positioning opportunity.**

The direct trigger for this round of severe market volatility was the US May non-farm payroll data, which significantly exceeded expectations. Data released on June 5 showed that US non-farm payrolls increased by 172,000 in May, nearly double the expected 88,000, with combined upward revisions of 93,000 for March and April. According to CME FedWatch Tool, the probability of a Federal Reserve rate hike within the year subsequently rose to 63%, with the probability of a hike before January next year approaching 100%. On that day, the Philadelphia Semiconductor Index (SOX) fell more than 10% in a single session, marking its largest one-day drop since March 2020, while the Nasdaq Composite declined by 4.18%.

However, after analyzing the situation through four dimensions—rate hike expectations, tech valuations, trade crowdedness, and AI industry progress—multiple institutions reached a highly unified conclusion: before the AI industrial cycle ends and the slope of EPS upward revisions reverses, the core mainstream position of the tech style remains unshaken. As the window for A-share semi-annual report previews and official US earnings reports opens successively from late June, the ability of industries to deliver performance will face substantive testing.

## Rate Hike Expectations: Historical Cases Show EPS Upward Revisions Can Withstand Interest Rate Shocks

In a strategy weekly report released on June 7, GF Securities' strategy team explicitly stated, "There is no historical case showing that rising interest rates and shrinking liquidity are unfavorable for tech stocks or lead to valuation compression for growth stocks. This logical relationship exists more in the assumptions of discount rate models."

The team reviewed five classic cases: the US internet cycle in 1999, the AI wave in 2023, and the A-share mobile internet boom in 2013, supply-side reform in 2017, and the new energy surge in 2021. The conclusion was consistent: **When industrial trends drive continuous upward revisions of EPS for leading companies and strong performance delivery, disturbances from interest rates and liquidity are only temporary, and the mid-term stock price trend remains unaffected. Conversely, if stock price gains are primarily driven by valuation expansion rather than EPS, the impact of monetary tightening is more severe.**

****

**The historical reference of the 1999 internet bubble is the most compelling.**

After the Federal Reserve raised rates for the first time in June of that year, it hiked rates six consecutive times. The Dow Jones Industrial Average basically moved sideways, while the Nasdaq Composite rose another approximately 91%, peaking only in March 2000. **GF Securities pointed out that the root of this divergence lay in EPS trends—NASDAQ 100 EPS grew by 60% in 1999, while Dow Jones EPS grew by only 19%. Rising interest rates suppressed valuations in traditional low-growth sectors but failed to halt the trend in sectors with exploding earnings.**

****

Returning to the present, the NASDAQ 100 EPS growth rate in Q1 2026 has risen to 36%, while the Dow Jones EPS growth rate has dropped to 4%, a pattern highly similar to 1999. GF Securities believes that, combined with the latest industrial trends, there is currently no evidence suggesting that the EPS of core Nasdaq companies needs to be downwardly revised. Guosheng Securities (Xiong Yuan, Dai Kun) also noted in a commentary on June 6, "This round of AI-driven tech rally has strong industrial trends and earnings support. We tend to believe that the adjustment in tech stocks should be an opportunity for re-positioning."

## Tech Valuation: Investment Horizon Determines the Reference Frame

GF Securities pointed out that the starting point for valuation discussions lies in the setting of the investment horizon, with essential differences in the effectiveness of valuation indicators across different timeframes.

**Historical data shows that within a one-year dimension, the correlation between a stock's initial Price-to-Book (PB) ratio and its annual gain is not significant. It is only after a three- or five-year dimension that the effectiveness of low PB ratios significantly strengthens.**

****

At the industry level, for growth manufacturing sectors such as electronics, communications, computers, power equipment, and defense, prosperity indicators like revenue growth rates and changes in ROE have far greater explanatory power for annual gains within a one-year dimension than valuation indicators like PE/PB percentiles. The correlation coefficient of the latter with gains fluctuates between positive and negative, offering limited reference value.

In contrast are stable-profit sectors such as utilities, transportation, and home appliances. For these sectors, where profit elasticity is limited, the valuation level at the time of purchase largely determines the return.

GF Securities also emphasized that **the key to valuation judgment in prosperity investing lies in the marginal change in prosperity: during the phase of accelerating growth, valuations often continue to rise, making the current valuation level less meaningful; only after the growth rate hits an inflection point does pressure for valuation decline emerge.**

Historical data shows that the median PB ratio tends to rise during periods of accelerated growth and fall during periods of decelerating growth. Double upgrades or double downgrades depend on the direction of prosperity, not the absolute valuation level.

Addressing market skepticism about whether a PB ratio exceeding 40x for manufacturing companies implies a bubble, GF Securities cited cases from the 1990s internet era: Dell's PB ratio approached 50x in 1997, supported by an extremely high ROE of around 80% that year; Cisco and Qualcomm also had PB valuation peaks in the 30 to 40x range in 1999.

The team believes that the core drivers of high PB ratios for growth companies are extremely high ROE and "invisible assets" such as R&D strength, technical patents, and customer barriers. Taking some overseas computing power leaders in the current A-share market as examples, if high turnover rates and high gross margins can be maintained, a high PB combined with a reasonable dynamic PE does not necessarily imply a risk of valuation bubble.

## Crowdedness Warning: Historical Thresholds Easily Fail in the Face of Industrial Trends

SDIC Securities pointed out that its constructed A-share "High-to-Low Switch Index" reached 60% as of June 5, touching the upper bound of the range for high-low differentiation trends in the past three years. Looking back at eight typical rounds of "high-to-low" switches since 2016, the average decline for high-positioned sectors was 12.8%; when the tech chain was the high-positioned sector, the average decline expanded to 16.1%.

The team also noted that since May, this round of AI hardware rally has shown characteristics different from previous ones: the overall market decline did not change the clear mainstream pattern, but rather tightened the consensus; the rise in the tech sector no longer drove resonance in other areas, but instead continuously siphoned funds from value styles such as high-dividend and consumer sectors, with the small-and-micro cap index falling more than 11%—this is seen as a typical signal of the second stage of consensus building (capital concentration shrinking).

However, **SDIC Securities emphasized that the current AI tech sector is experiencing a "left-side phased high-to-low switch," rather than the clear formation of the first peak.**

**The key to distinguishing the two lies in whether the industrial trend is damaged, whether macro "gray rhinos" are unclear, and whether the industry competitive landscape has collapsed. If these conditions hold, even if there is a short-term phased adjustment, the market will eventually return to the main line of industrial trends. The team believes that signs of slowing AI capital expenditure (to be reassessed in 2027) are difficult to falsify in the next six months. Observing various characteristics of the first peak, "the first peak of the great wave of AI tech pricing has likely not yet arrived."**

## Continuation of AI Industry Progress, Style Switching Requires a "Perfect Combination"

The core logic supporting the tech style—the expansion of AI demand—continues in the latest industrial data.

According to data cited by GF Securities, token usage on the OpenRouter platform continues to break historical records; Google I/O disclosed that as of May 2026, Google's monthly token consumption reached 320 trillion, a year-on-year increase of more than seven times; Anthropic's Annual Recurring Revenue (ARR) was revised up to $44 billion in early May and subsequently further raised to $47 billion, with capital expenditure guidance from large tech companies also continuing to be revised upward. According to previous reports by The Wall Street Journal, Anthropic is expected to achieve operating profitability for the first time in the second quarter.

Soochow Securities Co., Ltd. pointed out that precisely because model giants like Anthropic continue to raise their ARR, capital finds it difficult to easily question the commercial potential of AI. Once positive signals accumulate, the rally rebound could be very rapid, making it difficult to easily lose core positions.

GF Securities' market pricing framework offers two core judgments:

**First, whether the tech rally ends depends on the AI industrial cycle, with monetary liquidity merely being "the icing on the cake";**

**Second, a style switch (to consumer, healthcare, and financial sectors) requires the emergence of a "perfect combination"—strong economy, accelerating inflation, entry into a rate hike cycle, and peaking AI growth rates. All four conditions are indispensable, and they are not currently present simultaneously.**

Soochow Securities Co., Ltd. also noted, after comparing with the 2021 new energy rally, that the final peak of that rally **occurred only after early signals of weakening industrial competitive landscape appeared (intensified price games in the upstream and downstream of photovoltaics, diversification of power battery suppliers). Changes in the industry itself are a more core termination signal than liquidity, and similar signs have not yet appeared in the manufacturing end of the current AI infrastructure chain.**

## Short-Term Adjustment May Be a Positioning Window, Four Events Determine the Next Phase's Pace

On the operational level, GF Securities suggests that **starting from late June, the windows for A-share semi-annual report previews, official US semi-annual reports, and official A-share semi-annual reports will open successively. The adjustment in the overseas computing power sector (optical modules, optical chips, PCBs, fiber optic cables, etc.) in June may be a window for re-positioning. Returning to "first principles," EPS and industrial trends remain the core drivers of stock prices.**

Guosheng Securities highlighted four key observation nodes in the near term:

First, the progress of the US-Iran situation and oil price trends will determine the direction of inflation and the timing for restarting the rate cut window;

Second, the US May CPI data (released on June 10), requiring attention to the transmission of energy prices to core goods and service prices;

Third, the mid-June interest rate meetings of major central banks. According to OIS market pricing, the probability of rate hikes by the ECB and the Bank of Japan at their June meetings is already relatively high;

Fourth, Waller's first appearance and statement on June 18. His judgment on inflation rebound and the interest rate path will become an important reference for the market to reassess policy prospects. If the Federal Reserve's communication mechanism changes, the market's pricing logic for future interest rate paths will face reshaping.

SDIC Securities suggests that in the current environment of uncertain liquidity, tech varieties lacking EPS support have "contingent" opportunities with higher risks in subsequent rallies; whereas leading varieties in the AI infrastructure chain with high yield rates, strong customer stickiness, and supply chain control advantages will show stronger resilience against liquidity headwinds. Soochow Securities Co., Ltd. also recommends replenishing leading varieties after the rally adjusts to a low-volatility state. Core observation indicators include the dynamics of ARR for model giants like Anthropic and changes in the growth rate of token consumption. Before the industrial trend clearly ends, a complete withdrawal is not advisable.

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