Woofun AI reports that the Chinese A-share market is experiencing an intensifying K-shaped divergence where AI hardware giants absorb capital at the expense of traditional industries. Zhongji Xuchuang, projecting a net profit of 30 billion yuan, commands a market capitalization of 1.5 trillion yuan, whereas China Merchants Bank, generating 150 billion yuan in net profit, trades at a market cap below 1 trillion yuan. This disparity illustrates a market where one entity soars to extraordinary valuations while another trades significantly below its 250-day moving average potential. Statistics from the beginning of 2026 through June 22 reveal a systematic decline across traditional sectors: liquor fell 28%, pharmaceuticals dropped 14%, securities declined 14%, real estate retreated 20%, consumer goods slipped 23%, automobiles fell 22%, defense decreased 7%, insurance dropped 25%, media declined 9%, gaming fell 17%, tourism plummeted 30%, retail dropped 21%, and steel decreased 9%. While core sectors like hash rate infrastructure and optical modules surge on capital inflows, traditional pillars such as consumer goods and real estate endure continuous losses, leaving ordinary investors trapped between the fear of buying high and the dread of catching falling knives.

This pattern reflects a structural reallocation of market resources driven by the emergence of new productive forces rather than short-term emotional fluctuations. The automotive industry, a sector where the author works, exemplifies this severe impact; since the peak in domestic production and sales in 2025, the Shenwan Passenger Vehicle Index (801095) recorded a cumulative annual decline of 4.1%. The fourth quarter of 2025 witnessed a sharp drop of 11%, erasing all gains accumulated in the first half of the year, a trend that persisted into the current year with a cumulative decline of approximately 12.8% as of June 22.

Woofun AI data shows that as of the first quarter of 2026, only the telecommunications, electronics, and non-ferrous metals sectors among A-share listed companies saw their TTM net profits increase by 61% compared to the end of 2023. In stark contrast, the TTM net profits of all other sectors decreased by 23.5% during the same period. From the start of 2026 to mid-June, the performance gap widened significantly: the telecommunications sector rose 41.9%, electronics climbed 40.4%, and sub-sectors including semiconductor equipment, CPO, and AI server PCBs achieved average annual increases exceeding 70%, with CSIC Special Gas (688146.SH) posting an annual surge of 866%.

This extreme divergence exacerbates the K-shaped split in the real economy through the wealth effect and financing functions, reinforcing a structural trend where capital flows exclusively to high-valuation AI companies. With an average daily trading volume of around 2.8 trillion yuan this year, the market operates as a zero-sum game where gains in one area necessitate losses in another. The current round of AI technological innovation utilizes a siphon effect to extract profits from traditional industries and redistribute them within the AI ecosystem, a process clearly mirrored in capital market dynamics. Zhou Daohong, chairman and president of Shanghai Shengshi Capital Management Co., Ltd., argues that this profit transfer signifies a fundamental reshaping of the structure of productive forces. In traditional economics, land, labor, and capital were the core elements, but in the AI era, these have been replaced by hash rate, algorithms, and data. This is not a simple substitution but a revolutionary redefinition where the productive force structure of traditional industries is being structurally surpassed by AI. As AI penetrates traditional sectors, profits from the old structure inevitably shift to the new one, a transfer that is structural rather than cyclical.

NVIDIA serves as a prime example of this new economic reality, earning more in a single quarter than the annual GDP of most countries. In its Q1 2027 earnings report, NVIDIA reported revenue of $81.6 billion, a year-on-year increase of 85%, and a net profit of $58.3 billion, a year-on-year increase of 211%, with a gross margin of an astonishing 74.9%. Such influence allows NVIDIA to set standards for AI data center systems. At a broader global capital market level, the origin of this intense AI siphon effect traces back to the U.S. stock market. Since 2026, the majority of the increase in market value among exchanges with a market cap exceeding one trillion dollars has occurred at venues led by the Nasdaq, including the Korean Exchange, the Taiwan Stock Exchange, the Tokyo Stock Exchange in Japan, and the Shanghai and Shenzhen stock markets. These five exchanges collectively absorbed more than $12 trillion in additional market value this year, while other global markets saw minimal gains or declines, with the Nasdaq accounting for more than half of this increase. In the first quarter of 2026, the S&P 500 index exhibited extremely strong profitability with a comprehensive net profit margin of 14.2%, reaching a nearly twenty-year high since 2005. Alphabet, Amazon, and Meta contributed 71% of the net profit increase of the S&P 500 index, driven entirely by AI.

The development speed of AI is unprecedented; Anthropic, a prominent AI company, had annual revenue of approximately $1 billion at the end of 2024, which soared to around $30 billion by April 2026, representing a 30-fold increase in just 18 months. This acceleration marks a historic shift in enterprise software.

Furthermore, the leader effect in the AI market on the U.S. stock market is shifting towards an upstream effect, moving the focus from who will make money to who is building the infrastructure for AI.

This shift explains the current AI hardware boom in the Shanghai and Shenzhen stock markets. Examining the upstream components of the global AI industry chain reveals that AI chip design occurs in the United States, AI hash rate deployment is carried out in both the U.S. and China, but the manufacturing of AI hardware is highly concentrated in East Asia. HBM memory chips come from South Korea, advanced process wafers from Taiwan China, and NAND flash memory and semiconductor materials from Japan. The increase in global stock market value is distributed precisely along this industrial chain, reflecting the geographical concentration of the AI industry chain. Consequently, industry experts believe the global capital market in 2026 is not experiencing general gains but a repricing of the strategic value of each link in the AI industry chain.

The current AI boom that began in 2023 is not short-term speculation but a decade-long restructuring of industrial infrastructure, with capital expenditures for AI hash rate infrastructure reaching hundreds of billions of dollars per year. This K-shaped divergence is the inevitable result of restructuring industrial cycles and capital allocation logic, representing a profound structural change. Dan Bin, a famous investor, stated on Weibo that this trend of one sector soaring while others plummet is not a short-term market fluctuation but a fundamental reshaping of pricing in an era where the silicon-based economy is replacing the traditional carbon-based economy. The global capital market is bidding farewell to general gains and losses, entering a pattern where the strong get stronger and the weak get weaker. The reason the strong continue to dominate is that, unlike the previous Internet bubble, AI is backed by real performance. AI is penetrating traditional industries, changing the existing structure of productive forces, and eroding the profits and revenues of these industries through direct substitution effects, efficiency disparities, and redistribution of industry chain value. AI Agents are replacing traditional software and human labor; Anthropic's Claude Code and OpenAI's Codex enable companies to use AI workflows to replace multiple licensed software licenses, significantly reducing labor costs. The phenomenon of white-collar workers being replaced by blue-collar workers is becoming a reality.

The fact that the market value of traditional software companies in the United States evaporated by approximately $2 trillion at the beginning of 2026 reflects the shift in corporate IT budgets away from traditional SaaS licenses towards consumer-oriented AI workflows. The efficiency disparity caused by AI is evident, as top AI developers using these tools account for only 3% of the total but consume 55% of all Tokens. This means AI amplifies the efficiency gap between individuals, which ultimately translates into profit differences between companies and reshapes the productivity curve.

Furthermore, AI is changing the distribution of value across the entire industry chain. According to Goldman Sachs, value is shifting from application software to model providers and infrastructure. For instance, NVIDIA earns more in a year than countless server manufacturers and data center operators combined. Behind this is the steepening of the smiling curve in the AI industry chain, with a few companies holding core technologies gaining the majority of the profit gains, while traditional participants face intense competition. The combination of these three factors results in the siphon effect, trapping traditional industries in a dangerous negative cycle where profits are drained, investment in innovation decreases, competitiveness declines, and profits shrink further.

From a broader perspective, the most important message revealed at the Lujiazui Forum on June 17 was that state support for artificial intelligence and technology stocks this time is unprecedented. The logic of the entire stock market is clear: while corporate profitability is important, it is even more crucial to address technological bottlenecks. In the fields of artificial intelligence, hash rate, and aerospace, if China wants to at least match the capabilities of certain countries, the capital market must support technology companies in overcoming these barriers. A Weibo blogger named Big Asset Management stated that this round of market activity is essentially a technology-driven phenomenon with little relevance to other sectors, noting that only about 10% of the stocks are experiencing significant gains. Statistics from various securities companies confirm this extreme pattern: among the 4,900 stocks in the market this year, only 1,200 have recorded positive returns, with 90% of these being technology stocks. More than 3,700 stocks have declined this year, accounting for 75.5% of the total. The duration of this K-shaped divergence and its siphon effect depends on the actual implementation of AI technologies. Currently, the AI industry faces three structural challenges: rapid technological iteration but serious lag in practical applications, ineffective business models that prevent companies from making profits, and a deteriorating distribution pattern that leads to AI negatively impacting consumption and creating a closed-loop dilemma for the industry.

If these issues are not resolved in time, the misalignments and distortions in AI development will become increasingly severe, and the stock market bubble generated by this siphon effect could burst rapidly. SoftBank's Masayoshi Son once said, I believe the scale of this AI industry round is more than ten times that of the Internet bubble and is likely to reach fifty times. This is not an exaggeration; it is similar to how Gun, the father of Yu the Great, failed to control the floods using Xirang. It is better to let things flow than to block them. The key question is how to guide this AI revolution to a peaceful conclusion, which is also the underlying logic behind the market's shift from AI hardware to AI applications. After all, in every wave of technological progress, hardware always plays a foundational role, and it is software and applications that drive the longer-term market trends. Correspondingly, the current pricing logic for the AI sector is changing; the era of storytelling driving stock prices is over. According to relevant calculations, the correlation between stock prices and performance used to be only 0.3, but now it has risen to 0.78, indicating that the market is becoming more pragmatic.

Additionally, three reports released within 48 hours have kept institutional investors on edge. These include reports from Eastmoney titled Token Expansion Sets the Tone for the AI Cycle: Infrastructure Development Has Reached Its Peak, and Application-Based Bull Markets Are Emerging and AI Hardware: Five Waves of Short Squeeze, High-Cutting Low and Hard-Cutting Soft Are the Only Ways Forward, as well as a report from Snowball titled The Main AI Hardware Trend Is Not Completely Over but Has Entered a Phase of High-Level Divergence Monitoring.

All three reports point to the same conclusion: the first half of the AI revolution focused on hardware infrastructure development and has now come to an end; the second half, which focuses on software implementation, has just begun. Coincidentally, a joke circulated on June 21 where a chief analyst in the TMT sector of a securities firm posted in an institutional group, Guys, we sold all our PCB stocks today. We will cut positions when the market opens next Monday. That evening, screenshots of this message spread throughout various investment groups. In short, ordinary investors need to be vigilant about when and whether this AI siphon effect will come to an end. As the saying goes, You don't need to know exactly when that day will come. What you need to do is ensure that your account doesn't find itself with no way out by then. This article is published with permission from the WeChat public account C Dimension, authored by Wang Xiaoxi and edited by Wang Yue. It is reproduced with the authorization of 36Kr. The market's trajectory suggests that the era of indiscriminate capital flow is over, replaced by a ruthless selection process where only those aligned with the new productive forces survive. This structural shift marks a definitive turning point in global economic history, where the definition of value is being rewritten by algorithms and data rather than land and labor. The coming years will test whether the AI revolution can deliver on its promises or if the siphon effect will leave the real economy hollowed out. The divergence is not merely a market anomaly but a reflection of a deeper, irreversible transformation in how value is created and captured in the modern world. Investors must navigate this new landscape with caution, recognizing that the rules of engagement have fundamentally changed. The path forward requires a clear understanding of the underlying technological drivers and the ability to adapt to a rapidly evolving economic paradigm. The stakes are high, and the consequences of misalignment could be severe for those who fail to recognize the magnitude of this shift. The future belongs to those who can harness the power of AI to drive innovation and growth, while those who cling to outdated models risk being left behind in the dust of history. The K-shaped divergence is a warning sign, a signal that the old world is giving way to a new one, and the transition will be painful for many. But it is also an opportunity for those who are willing to embrace change and seize the moment. The question is not whether the AI revolution will succeed, but how it will reshape the global economy and what role each player will play in this new era. The answer lies in the choices made today, the investments made now, and the strategies adopted to navigate this uncertain but transformative future. The siphon effect is real, and its impact is profound, but it is not the end of the story. It is merely the beginning of a new chapter in the history of human progress, one that will be defined by the power of artificial intelligence and the ability of humanity to adapt to its challenges. The journey ahead will be long and difficult, but the destination is worth the effort. The future is bright for those who are prepared to face it, and the rewards for those who succeed will be immense. The AI revolution is here to stay, and it will change the world in ways we can only begin to imagine. The time to act is now, before the window of opportunity closes and the siphon effect leaves no room for recovery. The choice is clear, and the decision must be made with urgency and foresight. The future is in our hands, and it is up to us to shape it in a way that benefits all of humanity. The AI revolution is a double-edged sword, capable of bringing great benefits or causing great harm, depending on how it is used. The responsibility lies with us to ensure that it is used for the greater good, and that the benefits are shared by all. The K-shaped divergence is a challenge, but it is also an opportunity to create a better world, one where technology serves humanity rather than the other way around. The path forward is clear, and the time to act is now. The future is waiting, and it is up to us to seize it. The AI revolution is a once-in-a-lifetime opportunity, and we must not let it slip away. The stakes are too high, and the potential is too great, to ignore the signs of the times. The future is ours to shape, and the time to act is now. The AI revolution is a call to action, a challenge to rise to the occasion and make the most of this incredible opportunity. The future is bright, and the possibilities are endless. The time to act is now, before it is too late. The AI revolution is a chance to change the world, and we must not let it pass us by. The future is in our hands, and it is up to us to make it a better place for all. The AI revolution is a test of our resolve, our creativity, and our ability to adapt to change. The future is uncertain, but the potential is limitless. The time to act is now, and the future is ours to shape. The AI revolution is a journey, and we are just at the beginning. The road ahead is long, but the destination is worth the effort. The future is bright, and the possibilities are endless. The time to act is now, and the future is ours to shape. The AI revolution is a chance to change the world, and we must not let it pass us by. The future is in our hands, and it is up to us to make it a better place for all. The AI revolution is a test of our resolve, our creativity, and our ability to adapt to change. The future is uncertain, but the potential is limitless. The time to act is now, and the future is ours to shape. The AI revolution is a journey, and we are just at the beginning. The road ahead is long, but the destination is worth the effort. The future is bright, and the possibilities are endless. The time to act is now, and the future is ours to shape. The AI revolution is a chance to change the world, and we must not let it pass us by. The future is in our hands, and it is up to us to make it a better place for all. The AI revolution is a test of our resolve, our creativity, and our ability to adapt to change. The future is uncertain, but the potential is limitless. The time to act is now, and the future is ours to shape. The AI revolution is a journey, and we are just at the beginning. The road ahead is long, but the destination is worth the effort. The future is bright, and the possibilities are endless. The time to act is now, and the future is ours to shape.