October 8, the first trading day after China's National Day holiday, saw the "king of A-shares," ChangXin Memory Technologies (CXMT), plunge 7.79% on heavy volume to 50.52 yuan, marking a new low since August 11, with its total market value falling back to 3.43 trillion yuan. Since its listing on July 27, this domestic memory chip leader peaked at 61.80 yuan, then oscillated between 50 and 60 yuan for nearly two months. Today's sharp decline can be seen as a downward break.

From a fundamental perspective, CXMT's operating performance is strong, with revenue of 150.3 billion yuan in the first half of 2026, net profit of 77.6 billion yuan, and a consolidated gross margin of 84.84%. Measured by first-quarter revenue, the company is already the world's fourth-largest DRAM manufacturer, with market share rising to 8%. The company's long-term logic has not been disproven either, as demand for memory from AI computing power persists, and its position as the only large-scale mass producer of domestic DRAM remains unshaken. So who exactly is selling today, and why?

Today's Worst-Performing Sector: CPO

Today, the CPO sector was the worst performer across the A-share market. Multiple core CPO and optical chip stocks including Changguang Huaxin, Yuanjie Technology hit the 20cm limit-down directly, Dongshan Precision was locked at the 10% limit-down, Shijia Photons fell over 15%, Dekeli dropped more than 10%, and Tianfu Communication declined over 7%. The main reason is that negative information surrounding optical communications has been extremely dense recently. Morgan Stanley's research report published during the National Day holiday continues to reverberate, noting that the United States may impose restrictions on Chinese-made optical modules through the FCC's "Controlled List" mechanism. The policy's core is the "65% U.S. content" rule, which could be phased in as early as the 3.2T generation. The dissemination of this report itself constitutes an expectation shock. Even though the policy may not take effect until after 2028, the market chose to price in supply chain risk immediately.

On the domestic industry front, the chairman of Changguang Huaxin stated at a business exchange meeting that with yield improvement, capacity expansion, and new entrants, optical chips may see long-term price declines. Yuanjie Technology's controlling shareholder and concert parties also disclosed their first reduction plan since listing at the end of September, intending to reduce holdings by no more than 288,500 shares in total, with potential cash-out of approximately 490 million yuan based on the closing price on the announcement date. As a result, both companies were hit directly with 20CM limit-downs.

Optical communications and memory both belong to AI computing hardware, and both were previously the core directions with the largest gains and highest crowding. So when the optical communications sector experienced a wave of limit-downs, the operational logic of funds was to reduce exposure to the entire AI hardware basket, and CXMT, as the core target in the memory direction, could hardly remain unscathed.

Supply-Side Signals Weigh on Memory Price Hike Narrative

The more substantive pressure on CXMT comes from supply-side signals emerging from the global memory industry chain, which have loosened the global memory "price hike narrative." In early October, Toshiba announced an investment of approximately 60 billion yen to expand its HDD plant in the Philippines, aiming to double HDD capacity for AI data centers by fiscal year 2027 compared to fiscal year 2025, and to raise its market share from currently slightly above 10% to 30%. This is Toshiba's first large-scale investment in the HDD field in recent years. Although HDD and DRAM are different storage media, the market interpreted this as a signal that the memory industry's "supply discipline" is loosening.

Samsung's third-quarter earnings guidance released today also brought negative signals. Third-quarter operating profit was 107.4 trillion won, up 782.5% year-on-year, but about 1% below the analyst average estimate of 108.7 trillion won; sales were 195 trillion won, also falling short of the expected approximately 200 trillion won. Although Samsung's profit surged nearly eightfold year-on-year, an epic and rare feat, it was still judged as "below expectations," indicating that the market's pricing of the memory price increase slope has become extremely demanding.

In fact, during the holiday period, overseas markets had already reacted first. On October 6, U.S. memory stocks collectively plunged, with SK Hynix falling over 6%, Seagate Technology dropping 9%, and Western Digital declining nearly 7%. The synchronized weakness of the global memory sector provided external sentiment groundwork for CXMT's decline today.

External Pressure Needs a Sufficiently Fragile Target

External pressure needs to land on a sufficiently fragile subject to trigger a sharp decline of today's magnitude. CXMT has such a structure. CXMT surged upon listing, with market value once climbing from 3.3 trillion yuan to 4.13 trillion yuan, then falling back to around 3.5 trillion yuan. Valuation was pushed to an extremely full level right from the start. For CXMT, sell-side judgments on fair value are extremely divergent. Goldman Sachs gave a target price of 129 yuan, Nomura saw 116 yuan, Mizuho and UBS both set 70 yuan, Capital Securities at 78 yuan, while a Morningstar analyst was the only one to give a "sell" rating, with a target price of just 16.1 yuan. Target prices ranging from 16 yuan to 129 yuan, a difference of nearly eight times. Such extreme divergence among institutions is itself a signal that CXMT's valuation anchor is unstable.

Changes in the shareholder structure also reveal market concerns about CXMT's high valuation. As of September 30, CXMT's margin financing balance had fallen to 9.003 billion yuan, continuously shrinking from over 15 billion yuan at the time of listing. This indicates that margin traders are systematically withdrawing, a vote of no confidence by leveraged funds on short-term pricing.

Additionally, CXMT's 34.9 billion yuan investment plan announced at the end of September also triggered market concerns. The company plans to use 18 billion yuan of oversubscribed funds to invest in a technology research and development project with total investment of 24.1 billion yuan and a second-phase memory wafer back-end testing base project with total investment of 10.8 billion yuan. This is a directional long-term positive, but the return cycle is over 30 months, contributing no profit increment in the short term, and instead intensifying market attention on the company's capital efficiency and depreciation pressure. With the stock price already up over 500% from the issue price, such "forward-looking positives" are more easily viewed by high-position holders as a window for profit-taking.

Macro Variables Also Played an Important Role

For a leader like CXMT with strong fundamentals to move from sideways trading to a breakdown, macro variables also played a very important role. Since September, U.S. long-term Treasury yields have once again climbed in an uncontrolled manner, with the 30-year Treasury yield currently around 5.72%, the highest level since 2002; the 10-year yield is about 5.34%, also in the high range since 2002. Bloomberg Economics data shows the 30-year Treasury term premium has risen to its highest since 2011. A rising term premium means the additional compensation investors demand for holding long-term bonds is systematically increasing.

As for the forces pushing up interest rates, they have shifted from "rate hike expectations" to fiscal deficits, term premiums, and competition for AI financing. U.S. federal debt has now exceeded 40 trillion dollars, fiscal deficits remain elevated, and the Treasury needs to continuously issue new debt to raise funds. Meanwhile, large technology companies have issued approximately 220 billion dollars in AI-related bonds this year, more than double last year's scale. This bond supply is competing with Treasuries for long-term capital, pushing up the "duration asking price" across the entire market.

Sharp rises in Treasury yields push up the discount rate in valuation models, reducing the present value of future profits. For growth-stage AI technology giants, the impact is quite noticeable. Although CXMT is listed on the A-share market, the downward revision of valuation premium expectations for U.S. technology giants will also affect the valuation premium of domestic technology companies.

CXMT's Plunge: A Microcosm of China's Tech Stock De-Rating

CXMT's sharp decline can be described as a microcosm of the overall de-rating process of Chinese technology stocks. If we pull back the lens even further, there is actually a more fundamental pricing force at work: global AI industry competition. During the long holiday, overseas markets continued to rise, while Hong Kong stocks clearly lagged, and A-shares opened with declines first, with the divergence extremely obvious. Global capital's pricing choices have become very clear: U.S. technology assets continue to enjoy valuation premiums, while RMB computing assets as a whole bear valuation discounts.

This is also why overseas AI rallies can continue to push higher, while domestic computing sectors are prone to triggering concentrated selling whenever negative rumors emerge. Currently, the premium rate of Nasdaq technology ETFs has reached nearly 35%. Capital would rather pay over 30% more in costs to lock in overseas technology assets. Even "emerging markets ex-China" indices have become new weighting tools for overseas tracking of emerging markets, while turning a blind eye to excellent domestic AI assets.

This may not be a reasonable valuation rebalancing issue. If this situation is allowed to develop, it may not just be a question of pricing power, but could also affect the underlying capability of our AI industry competition. In today's AI race, single-point technological breakthroughs are certainly important, but what matters more is sustained, low-cost capital supply. U.S. AI giants enjoy valuation premiums, making bond issuance and secondary offerings easier, share-swap mergers and acquisitions more feasible, and top talent can be retained through equity incentives. If Chinese AI assets are abandoned by capital for a long time, valuation discounts will push up financing costs, compress R&D investment and M&A integration space, and weaken talent attractiveness.

Once this negative feedback loop forms, the gap will not remain at the stock price level, but will enter the competition rhythm of computing power reserves, foundation model iteration, and even the application ecosystem. It must also be recognized that the window period for the AI industry is not generous. As technological iteration enters an accelerating phase, the capital support gap will be rapidly amplified. If Chinese AI companies cannot obtain sufficient long-term capital due to prolonged valuation pressure, they may be forced to slow down in next-generation models, agents, and even robotics. This will transmit to the intelligent upgrading of manufacturing and affect the efficiency competition of the entire industry chain.

Valuation discounts themselves are not a sufficient condition for industrial failure, but long-term capital misallocation will weaken the fault tolerance space for industrial catch-up. Whether Chinese AI assets can obtain capital support matching their industrial weight. If the answer to this question remains unclear for a long time, what will be repriced today is not just CXMT; China's starting position in the next round of AI competition will also be re-examined. At present, what China's AI industry chain needs most may be market trust and support.