Guangfa Securities: Setting Aside US-Iran Tensions and High Oil Prices - Which Industries Can Maintain Independent Strong Prosperity in the Future?

Tongtong Finance APP has learned that GF Securities issued a research report stating that the visibility of overseas AI chains such as optical communications will deepen by 2027, remaining a confirmed growth sector and the current main position for institutions. However, this is relatively linked to changes in the Middle East conflict, and short-term volatility remains difficult to control. Based on internet technology experience, if the growth trend becomes less sensitive to geopolitics and high oil prices, then regardless of how the US-Iran situation unfolds, there should be an advantage in allocation. Therefore, from the perspective of controlling portfolio volatility and hedging, the bank recommends continuing to allocate to two beta sectors with upward fundamentals and less impact from oil prices: energy storage chains (inverters/lithium batteries) and domestic AIDC chains (especially ByteDance-related chains).

GF Securities’ main points are as follows:

1. 1999-2000: The Impact of the Kosovo War on the Tech Sector

In last week’s weekly report, the focus was on: the Kosovo War in 1999, rising oil prices, US inflation, and Fed rate hikes—what impact did this process have on the US stock market and the tech sector?

The core conclusion is: the oil price increase driven by the war boosted inflation, causing the Dow Jones Industrial Average to be temporarily suppressed in Q3 1999, peaking and then declining in January 2000; meanwhile, the Nasdaq tech sector performed more strongly, unaffected by tightening, with its bubble peak lagging the Fed’s first rate hike by nine months.

2. 1999-2000: History Shows that Independent Industries with High Prosperity Can Temporarily Overcome High Oil Prices and Rate Hikes

(1) The denominator: Kosovo War triggers liquidity tightening

In early 1999, OPEC cut production + Kosovo War (March-June 1999), oil prices rose from $10/barrel to over $30; the Fed resumed rate hikes in June 1999, totaling six hikes by May 2000, shifting US stock liquidity toward tightening.

(2) The numerator: Millennial bug replacement cycle supports high growth expectations

The Y2K narrative fermented from 1996-1998, with mainstream media coverage, US Congress records, presidential speeches, prioritizing hardware and system bug fixes in finance, healthcare, military, and government systems, leading to order booms in the tech industry in 1998-1999.

Correspondingly, leading tech companies’ performance in 1999: Dell’s net profit growth of 55%, Microsoft 73%, IBM 22%, Intel 21%, all maintaining high growth or significantly accelerating from 1998.

Market expectations held that the replacement cycle driven by the millennium bug would continue into 2000.

(3) 1999 market performance: Strong fundamentals, overcoming liquidity tightening, tech bubble valuation

The Nasdaq 100 index’s EPS growth in 1999 was 60%, with a TTM PE of 95x, and a forward PE of 65x.

1999 was a year of intensifying tech bubble, as expectations that the millennium would further drive replacement cycles for small and individual investors, with tech performance overcoming rising interest rates, pushing the index to new highs.

(4) 2000 market performance: Deteriorating fundamentals and the last straw

The Y2K bug did not explode; media accused it of being a “Century Hoax” fabricated by tech companies. The peak in March 2000, seemingly burst by “Microsoft antitrust,” was actually a negative spiral in fundamentals.

Companies’ early investments in upgrades and replacements exhausted future industry demand for 2-3 years. Many tech giants’ earnings reports in March-April 2000 missed expectations, and some dot-com companies went bankrupt.

By the end of 2000, US computer and electronics inventories reached historic highs, further suppressing future performance. By 2001, the profit growth of the Nasdaq 100 fell from 60% in 1999 to -50%, marking the end of the tech bubble myth.

3. Returning to the Present: Which Industries Might Maintain Independent High Prosperity in the Future, Aside from Geopolitics and High Oil Prices?

Currently, the visibility of overseas AI chains like optical communications extends to 2027, remaining a confirmed growth sector and the main institutional position. However, this is relatively linked to changes in the Middle East conflict (oil prices → US interest rate environment → US AI → domestic supply chain), and short-term volatility remains hard to control.

Drawing from the internet technology experience, if some industries can maintain independent high growth and become less sensitive to geopolitics and high oil prices, then regardless of how the US-Iran situation develops, they should have an advantage in allocation.

Therefore, from the perspective of controlling portfolio volatility and hedging, the bank suggests continuing to allocate to two beta sectors with upward fundamentals and less impact from oil prices: energy storage chains (inverters/lithium batteries) and domestic AIDC chains (especially ByteDance-related chains).

Risk Warning: Geopolitical risks, overseas inflation risks, and low expectations for domestic steady-growth policies.