A-Share Market’s Second-Most Expensive Stock Hits 20% Limit Down as High-Valuation Tech Shares Come

China’s A-share market saw significant sector rotation on October 8, the first trading day after the National Day holiday, with technology stocks coming under heavy pressure.

Yuanjie Technology, one of the most expensive stocks in China’s A-share market, plunged 20% during trading, falling below the 1,300 yuan-per-share mark and triggering widespread market attention.

Yuanjie Technology, listed under the ticker 688498, was trading at around 1,290.40 yuan per share after hitting the 20% daily limit down, giving the company a market capitalization of approximately 160.7 billion yuan. The stock had previously surpassed several other high-priced technology shares and briefly became one of the most closely watched “thousand-yuan stocks” in the market.

The sharp decline was part of a broader sell-off in the optical-chip and CPO sectors.

During Thursday morning trading, several companies linked to optical communications and optical chips also fell sharply. Changguang Huaxin approached a 20% decline, while Dongshan Precision hit its daily limit down. Other companies in the sector, including Sijia Photon and Dekeli, also recorded substantial losses.

The weakness suggests that investors are reassessing some of the high valuations accumulated by AI and optical-communications companies during the previous rally.

Optical chips are critical components in high-speed optical communications and play an important role in optical modules used in data centers. As demand for artificial-intelligence computing infrastructure has expanded, the sector has attracted significant investor interest.

However, rapidly rising expectations can also create valuation risks.

Recent market information has suggested that optical-chip pricing expectations have weakened, with some market participants concerned about potential price pressure on optical chips supporting next-generation 1.6T products. Such developments could affect investors’ expectations for future profit margins across parts of the optical-communications supply chain.

Another factor drawing attention is Yuanjie Technology’s previously announced shareholder reduction plan.

On September 24, the company announced that its controlling shareholder and actual controller, ZHANG XINGANG, together with several parties acting in concert, planned to reduce their holdings by no more than 288,500 shares through centralized bidding or block trades.

The proposed reduction represents approximately 0.2317% of the company’s total share capital. Although the percentage is relatively small compared with the shareholders’ combined holdings, it attracted market attention because it was the first reduction plan involving major shareholders since the company was listed in December 2022.

The market reaction also highlights a broader issue surrounding high-priced stocks.

A high nominal share price does not automatically mean that a company is overvalued. What matters more is the relationship between the stock price and the company’s earnings, cash flow, growth prospects and competitive position.

Nevertheless, when a company’s valuation has risen substantially on expectations of rapid industry growth, any change in expectations can lead to significant price volatility.

This is particularly relevant for AI-related technology stocks. Investors have been pricing in strong demand for computing infrastructure, high-speed optical communications and data-center equipment. If future earnings growth fails to match those expectations, valuation compression can occur quickly.

The broader A-share market also showed signs of significant rotation on October 8.

By midday, the Shanghai Composite Index had fallen 0.27%, while the Shenzhen Component Index declined 1.24% and the ChiNext Index dropped 2.13%. More than 3,300 stocks were lower across the market. At the same time, CPO-related stocks remained under pressure, with Yuanjie Technology and Changguang Huaxin both experiencing 20% declines.

However, capital was not simply leaving the equity market altogether. Instead, investors appeared to be shifting toward different sectors.

Banking and shipping stocks showed relative strength, while some solid-state battery companies also attracted buying interest. China Construction Bank and Industrial and Commercial Bank of China were among the financial stocks reaching record highs during the session.

This divergence suggests that investors are becoming more selective after the strong rally in technology stocks.

For Yuanjie Technology and the broader CPO sector, the key question going forward will be whether industry fundamentals can support the high growth expectations embedded in current valuations.

The company’s sharp decline is therefore more than an isolated stock-market event. It reflects the growing sensitivity of high-valuation technology shares to changes in industry expectations, product pricing and shareholder activity.

For investors, the episode serves as a reminder that stock prices should not be evaluated simply by looking at whether a share trades above or below a certain nominal price. More important factors include valuation, earnings growth, cash flow, industry competition and the sustainability of future demand.

As China’s A-share market enters the post-holiday trading period, the performance of high-priced technology stocks such as Yuanjie Technology may provide an important signal of whether market capital continues to favor high-growth AI themes or begins to rotate toward companies with more attractive valuations and clearer earnings visibility.

Risk disclaimer:This article is for news and information purposes only and does not constitute investment advice. Stock-market investments involve risks, and investors should make independent decisions based on their own circumstances.