Analysis of Sector Rotation in A-Share Market: In-Depth Research on Investment Opportunities in Internet and Media Sectors

Based on collected market data and research materials, I will provide you with a systematic and comprehensive analysis report.

In 2025, the A-Share market presented a significant structural divergence pattern, with obvious differences in the performance of the three major indices: the Shanghai Composite Index rose 18.41%, the Shenzhen Component Index rose 29.87%, and the ChiNext Index soared 49.57% [1]. The annual trading volume of the market exceeded RMB 420.21 trillion, hitting a record high. All Shenwan Industry Sectors posted gains, with non-ferrous metals, national defense and military industry, and communication sectors leading the way, reaching 76.53%, 59.58%, and 53.33% respectively [1].

From recent market performance, the pace of sector rotation has accelerated significantly. The internet, cultural media, and power generation equipment sectors led the gains, while traditional sectors such as petrochemicals, insurance, and home furnishings ranked among the top decliners [2]. This phenomenon reflects the trend of market capital shifting from traditional industries to tech growth sectors.

The most prominent feature of the 2025 A-Share market was the huge gap between computing power hardware and application segments. The AI computing power infrastructure sector far outperformed the application segment; tech indices represented by the STAR Market and ChiNext Index performed brilliantly, while application segments such as internet and media saw relatively moderate gains [3].

Data from Jinduan Research Institute shows that the three Shenwan Secondary Industries with concentrated application targets—software development, IT services, and advertising marketing—posted full-year gains of 17.2%, 18.4%, and 15.7% respectively in 2025, which were comparable to the gains of the CSI 300 Index, but far lower than the 60% annual gain of the Sci-Tech Innovation and ChiNext Index (Double Innovation Index) [3]. This gap mainly stems from the fact that seven of the top 10 constituent stocks of the Double Innovation Index are AI computing power-related companies, with an average gain of as high as 247%.

Looking ahead to 2026, institutions generally believe that the market will shift from a “fast bull” to a “slow bull” trend. CICC pointed out that the spring rally is expected to continue, with market risk appetite improving in December, and the Shanghai Composite Index rising for 11 consecutive trading days [4]. CITIC Securities believes that the A-Share bull market is expected to continue, but the growth rate may slow down, and investors will pay more attention to fundamental improvements and prosperity verification [5].

According to the Q3 2025 AI Application Industry Report released by third-party institution QuestMobile, the monthly active user (MAU) scale of China’s AI applications on mobile terminals has exceeded 700 million. As of September 2025, the MAU on mobile terminals reached 729 million, and 200 million on PC terminals [6]. This data indicates that AI applications have entered the large-scale user stage, laying a solid foundation for commercial monetization.

As the first year of the “15th Five-Year Plan” (2026-2030), policy dividends will continue to be released in 2026. The Central Economic Work Conference has made positive statements regarding expanding domestic demand and focusing on stabilizing the real estate market [4]. The “Implementation Rules for the 2026 Car Trade-In Subsidy” issued by the Ministry of Commerce and 7 other departments has expanded the scope of consumer electronics subsidies to include smart glasses, tablets and other products for the first time, which will directly benefit the consumer electronics industry chain and AI application sectors [7].

After the correction in Q4 2025, the valuation advantage of the Hong Kong stock internet sector has become prominent. As of the end of 2025, the CSI Hong Kong Stock Connect Internet Index has fallen 18.55% cumulatively since October, and the sector’s latest trailing twelve months (TTM) price-to-earnings ratio (PE) is only 24.43 times, which is in the low range of the 26.36th percentile over the past 5 years [8]. The A-Share media sector is also in a valuation depression, providing ample room for subsequent growth.

As can be seen from the table, the year-on-year growth rates of all sub-sectors of internet and media increased by 4-5 percentage points in 2025, and institutional forecasts show that growth will further accelerate in 2026, with the games and internet e-commerce sectors given the highest growth expectations.

The US stock market also has a divergence phenomenon between computing power and application segments. In 2025, the full-year gains of FDN (Internet)/IGV (Software) ETFs were 10.7% and 5.6% respectively, lower than the 20.8% and 17.7% of QQQ (NASDAQ 100) ETF/SPY (S&P 500) ETF, and far lower than the 46.1% gain of the SMH (Semiconductor) ETF which concentrates on computing power [3]. This divergence has raised market doubts about whether future revenue increments from AI applications can cover huge capital expenditures.

US stock software stocks experienced an industry-wide slump this year; software giants with market capitalization over USD 100 billion such as CRM, NOW, and ADBE all fell by more than 20%. Although financial data shows that performance is still growing, investors are worried that the traditional SaaS subscription model is impacted by AI, especially the subscription model that relies on “more seats equal higher revenue” is facing challenges [3]. This trend may have an impact on A-Share software and internet companies.

Citi’s research report pointed out that the Chinese internet industry will focus on three major themes in 2026: recurring revenue growth from cloud infrastructure and model stacks, competition for user traffic among AI chatbots, and deployment of self-trained proprietary AI agents by vertical enterprises [8]. Tencent Holdings and Alibaba are listed by Citi as top AI concept stocks, verifying the AI implementation capabilities of leading enterprises.

As a leading Hong Kong-listed internet company, Tencent is at the forefront of AI application implementation, and its advertising and game businesses both benefit from AI technology empowerment. As a leading domestic cloud computing provider, Alibaba Cloud continues to invest in large model areas and is expected to achieve breakthroughs in the B-end market.

Recently, the AI application segment has performed actively, and companies such as Easy Click Worldwide (301171.SZ), Fushi Holdings (300071.SZ), and BlueFocus have been sought after by the market [6]. These companies share the following characteristics: rapid growth in AI marketing business, relatively reasonable valuations, and low institutional holdings.

• Easy Click Worldwide (301171.SZ)
  : The company’s main business is internet advertising and marketing. The application of AI technology has significantly improved advertising delivery efficiency and conversion rates. The company’s stock price has performed strongly recently, with a high turnover rate [6].
• Fushi Holdings (300071.SZ)
  : An AI application concept stock, its stock price has achieved consecutive daily limit-ups. The company has laid out layouts in AI marketing and content generation fields, benefiting from the rapid development of the AI application industry [6].
• Sanqi Interactive Entertainment (002555.SZ)
  : As a leading company in the game industry, AI technology has been applied to game development and user acquisition, significantly reducing costs and increasing efficiency. The company has reserved a number of AI-native games, which are expected to become a new growth driver in 2026 [9].

In an environment of increased market volatility, the allocation value of high-dividend assets becomes prominent. The operator sector (China Mobile, China Telecom, China Unicom) has the following advantages:

1. High dividend yield: The dividend yield is generally 4-6%, significantly higher than the market average
2. Stable business: 5G construction and cloud computing business provide steady growth
3. AI empowerment: Operators play an increasingly important role in the construction of AI computing power networks

CITIC Securities pointed out that cutting-edge technology tracks such as commercial aerospace, quantum technology, and controllable nuclear fusion will become important industrial trend trading varieties in 2026 [5]. The commercialization process of low-altitude logistics and satellite internet is accelerating, and the growth in flight ticket bookings during the 2026 New Year’s Day holiday has implied the recovery of the travel chain [7].

Soochow Securities analysis pointed out that based on historical patterns, growth style has always performed prominently in the spring rally. As the first year of the “15th Five-Year Plan”, sectors related to new-quality productive forces are expected to become the focus of capital allocation in 2026 [10]. However, investors need to pay attention to:

1. Short-term volatility risk
   : The market may face increased volatility in early January; it is recommended to maintain flexible positions
2. Prosperity verification period
   : The A-Share market is entering a critical period of prosperity verification; focus on varieties with improved fundamental expectations
3. Balanced allocation
   : It is recommended to maintain the allocation idea of “tech + cycle”, and pay attention to strong thematic opportunities at the end and beginning of the year

1. Core Position (50-60%)
   : Internet leaders (Tencent, Alibaba) + high-dividend operators
2. Flexible Position (20-30%)
   : Emerging AI application players (Easy Click Worldwide, Fushi Holdings) + games (Sanqi Interactive Entertainment)
3. Thematic Position (10-20%)
   : Commercial aerospace + low-altitude economy

1. Batch Position Building
   : Do not chase ups or sell downs; gradually build positions during corrections
2. Dynamic Adjustment
   : Adjust the position structure in a timely manner according to changes in prosperity
3. Long-Term Holding
   : High-quality targets are recommended to be held on an annual basis to share industry growth dividends

Based on the above analysis, we believe that the rise of the internet and media sectors has certain sustainability, but the following key points need to be noted:

1. Structural Opportunities Outweigh Overall Opportunities
   : There is an obvious demand for catch-up gains in the AI application segment, but internal differentiation within the sector will intensify
2. Profit-Driven Growth Will Take Over from Valuation Repair
   : In 2026, the market will shift from valuation expansion to profit support, with fundamental improvement being the core driving force
3. Grasp the Rhythm of Style Rotation
   : Growth style is expected to dominate in the first half of the year, and dividend style may generate excess returns in the second half

Investors should adhere to the investment philosophy of “not getting entangled in adjustments and fluctuations in small cycles, and actively seizing the two stock selection logics of prosperity and industrial development”, and select high-quality targets with technological barriers and scenario implementation capabilities in the main line of tech growth.

[1] A-Shares Regain 4,000 Points: Which Funds Did You “Hide in” During the Bull Market?

[2] 2024 A-Share Market Performance and Sector Rotation Analysis

[3] Where is the Path for AI Applications in 2026?

[4] CICC | January Sector Allocation: Spring Rally Continues

[5] CITIC Securities 2026 Investment Panorama Outlook: After the Tech Bull, Who Will Dominate?

[6] AI Application Segment Remains Strong; Multiple Stocks Including Fushi Holdings Hit Daily Limit

[7] 2026 A-Share Outlook: From “Fast Bull” to “Slow Bull”

[8] Citi Names Tencent and Alibaba as Core AI Concept Stocks

[9] What is the Main Investment Line for A-Shares in 2026?

[10] Tech Leads, Cycles Follow… Institutions Discuss How to Grasp the “Spring Rally” at the Start of 2026