Technology Stock Valuations Fall to Relative Lows as Analysts See Upside in 27 Shares

Table of Contents

• You might want to know
• Technology valuations and the market backdrop
• Key insights table
• Afterwards

You might want to know

• How has the market correction changed the valuation outlook for technology stocks?
• Which companies and industry trends are attracting the most attention from institutions?

Technology valuations and the market backdrop

After a substantial correction, China’s technology-focused market segments are beginning to look more attractive to investors assessing valuations and longer-term growth prospects. The adjustment has brought valuations back toward historically low ranges, while several supportive factors remain in view: improving liquidity, sustained strength in industry demand and a concentration of positive institutional expectations. Areas highlighted by market observers include semiconductors, AI hardware and optical modules—domestic technology sectors that have experienced significant price declines.

The pullback has been sharp. Since July, both of the two major innovation-focused indexes cited in the source have fallen by more than 40%. As prices declined, valuation measures also moved lower. The price-to-earnings ratio of the ChiNext Index has dropped below 30 times, placing it below the 8% historical percentile. The STAR 50 Index currently carries a higher trailing valuation, but institutions collectively forecast that its 2027 price-to-earnings ratio could fall to around 41 times. These figures do not guarantee a recovery, but they help explain why some investors are reassessing risk and potential returns after the correction.

Huajin Securities believes a short-term market bottom may already be emerging, while maintaining that volatility in A-shares does not necessarily overturn the longer-term “slow bull” trend. For near-term positioning, the firm identifies two broad groups. The first consists of industries with improving policy and business trends that have also experienced steep declines, including electronics—particularly semiconductors and AI hardware—communications and non-ferrous metals. The second consists of lower-valued blue-chip sectors, such as securities firms and consumer companies. The distinction reflects a balance between exposure to potential growth and the relative valuation support offered by established businesses.

Orient Securities also points to the liquidity outlook. Continued net inflows into broad-market exchange-traded funds (ETFs), in its view, should help ease liquidity pressures, making excessive fear about liquidity less warranted. At the same time, it cautions that global risks are increasing and should not be dismissed. Its suggested response has three parts: selectively reduce exposure to overseas computing-power supply chains; consider cyclical industries—including energy and chemicals, agricultural products and precious metals—as potential ways to hedge geopolitical and financial risks; and pay attention to lower-volatility, high-dividend areas such as banks. The firm’s broader medium-term view remains constructive on domestically developed hard technology.

Following the correction, analyst consensus indicates that the potential upside for a group of technology leaders has increased. According to Securities Times·Databao, among the electronics, communications and computer sectors, 27 companies with a latest market capitalization above 20 billion yuan meet two further conditions: at least five rating institutions cover each company, and their consensus forecasts indicate more than 100% upside. These figures describe analyst estimates, not assured future returns. Targets can change as earnings, valuations and market conditions evolve.

Cambridge Technology has the largest consensus-implied upside in the group. Its consensus target price is 424 yuan, compared with a latest closing price of 130.64 yuan, implying upside of more than 224%. Huaxin Securities says the company is benefiting from strong demand for high-speed optical modules, with a substantial increase in shipment value. A more favorable product mix has also contributed to a marked improvement in gross margin. The firm notes that Cambridge Technology is expanding its optical-module product range and preparing for emerging optical interconnect technologies, including NPO (near-packaged optics) and CPO (co-packaged optics). These developments, it argues, could help the company reinforce its competitive advantages. The consensus-implied upside for VeriSilicon, Dongshan Precision and Jianghai Shares is also above 150%.

Historical patterns suggest that lower-valued shares may have a greater chance of valuation recovery, although past patterns do not ensure future outcomes. Consensus estimates place the 2027 price-to-earnings ratios of Cambridge Technology, Longsys, Eoptolink and Innolight in the single digits. The source also notes that CPO leaders such as Eoptolink and Innolight have recently described industry demand as strong. Eoptolink said on an investor-interaction platform that production and operations were normal and orders on hand were sufficient. It expressed a positive outlook for fourth-quarter order demand and expected both production and shipments to increase significantly from earlier levels.

Eoptolink added that customer demand guidance and order conditions were favorable, and that industry conditions were expected to remain strong. It identified 800G and 1.6T products as the main products being delivered this year, while saying that the ramp-up in 1.6T shipments could accelerate further. This commentary points to the importance of product transitions within optical communications: investors are watching not only aggregate demand, but also how quickly customers adopt higher-speed products and how effectively suppliers convert demand into deliveries and revenue.

Hygon Information has the greatest institutional coverage among the companies discussed, with ratings from 24 institutions. Its performance in the first three quarters continued to grow rapidly. Revenue approached 15 billion yuan, an increase of nearly 58%, while net profit attributable to shareholders exceeded 2.8 billion yuan, up more than 45%. Xiangcai Securities sees several potential demand drivers, including AI Agent-related structural growth in server CPU usage, high domestic investment in computing capacity, broader adoption by internet and other non-domestic-information-technology-innovation customers, and the wider drive for semiconductor self-reliance.

According to Xiangcai Securities, these factors could help Hygon Information shift its revenue mix from one led mainly by the domestic information-technology-innovation market toward a model supported by both that market and commercial computing demand. The firm expects this expansion to support both the company’s business reach and the quality of its earnings. Over the longer term, it views Hygon as a foundational domestic computing-power asset positioned within the localization of AI infrastructure and the pursuit of self-reliance in high-end processors. This assessment is an institutional view, rather than a guarantee of growth.

Some companies have also reported particularly strong operating expectations. Yuanjie Technology recently announced that it expects third-quarter 2026 revenue of 650 million yuan to 700 million yuan, representing year-on-year growth of 264.56% to 292.60%. It expects net profit attributable to shareholders of 403 million yuan to 453 million yuan, an increase of 578.85% to 659.70% year on year. These are company forecasts, not final reported results. They illustrate why investors may distinguish between valuation recovery and earnings growth: a lower share price can attract attention, but the durability and delivery of business results remain central to assessing a company’s prospects.

In combination, the source presents a market shaped by both caution and opportunity. The sharp correction and lower valuation indicators have made parts of the technology sector more closely watched, while liquidity, industry demand and domestic technology development provide potential sources of support. Yet global risks, market volatility and the uncertainty inherent in forecasts remain important considerations. Analyst upside estimates and corporate guidance are best treated as inputs for further evaluation, not as predictions that any particular share price or financial result will be achieved.

Key Insights Table

Afterwards...

Looking ahead, the central question is whether lower valuations will be accompanied by sustained earnings growth and continued demand for domestic technology products. Developments in semiconductors, AI hardware, optical modules and high-speed communications may offer indicators of industry momentum, while ETF flows and global risk conditions could influence broader market sentiment.

Investors and observers will also need to distinguish between companies supported by current orders and delivery expectations, businesses with longer-term technology opportunities, and shares whose apparent upside depends heavily on changing valuation assumptions. The figures and institutional views summarized here provide a snapshot of expectations at the time of the source report; they do not remove uncertainty or guarantee future performance. Source data: Securities Times database.