Shen Nong Investment's Chen Yu: Next year's AI applications are like real estate in 2006, and innovative drugs are just the beginning of a twenty-year bull market

On December 20th, Chen Yu, founder of Shennong Investment, reviewed the market performance of 2025 at the 2025 Xueqiu Carnival and made forecasts for the 2026 market.

The investment class representative summarized the key points as follows:

1. Regarding the top ten predictions for 2026, if we were to write them this year, the first would be “The AI applications of 2026 are like the real estate of 2006.”

2. Innovative drugs are just the beginning of a twenty-year bull market, and there may be more exciting developments next year!

3. Under the premise of an efficient market, innovative drug index investment has good investment value.

From a global efficient market perspective, whether in the United States or Japan, long-term investments in outstanding innovative drug companies have shown impressive returns.

John Berger, founder of Vanguard Fund, believes that his best-performing fund is the S&P 500, but the innovative drug fund is an exception, as the returns of U.S. innovative drug ETFs far exceed those of the S&P 500.

1. Currently, few investors have achieved significant returns from AI applications. We basically judge that next year will be the explosive year for artificial intelligence applications, and on the investment side, whether in A-shares or Hong Kong stocks, there are huge opportunities.

The Hong Kong stock market has obvious advantages, and next year, there may be good investment opportunities in Hong Kong stocks focusing on AI and innovative biopharmaceuticals.

5. Whether interest rates rise or fall, industrial investment in AI and innovative drugs will continue to grow.

For fundamental investors, the valuation adjustments brought about by a rate-cutting cycle may present better layout opportunities, allowing them to seize buying opportunities when asset prices decline.

Chen Yu, founder of Shennong Investment, has won the Private Equity Golden Bull Award ten times.

Founded in 2009, Shennong Investment currently manages between 2 billion to 5 billion yuan and has pioneered and practiced the "premium investment" concept. The company focuses on three prosperous sectors: technology, pharmaceuticals, and consumption, aiming to select premium enterprises with leading positions, excellent entrepreneurial teams, and stock prices with safety margins.

According to statistics from Private Equity Ranking Network (as of the end of November 2025), in the Q20 ranking of subjective long-only products with a company size of over 500 million in the past five years, Shennong Investment's representative product "Shennong Premium" ranks 17th on the list with an outstanding performance of annualized returns of 29.6% and cumulative returns of 265.69% over five years, firmly positioned in the leading tier of the industry.

The following are some highlights shared by Chen Yu, provided by Xueqiu and edited by the class representative:

Innovative drugs are a business fraught with risks, but under the premise of an efficient market, they have investment value.

Question: In the market environment of 2025, where value and growth are split, what are your summaries on practical operations, and what are your current heavy positions? Chen Yu: We have a relatively important position in innovative drug investments, and it remains the same currently.

Our judgment is based on two major driving factors for growth stocks this time: one is from AI, and the other is the development of innovative drugs.

These two "wheels" have just begun to turn, so we are relatively investing more effort in innovative drugs.

Question: Since the fourth quarter, innovative drugs have been quite volatile. Do you still have a positive outlook on the future of innovative drugs? Can you provide an outlook on future investment opportunities in innovative drugs?

Chen Yu: Among the well-known stock gods, none are engaged in secondary market investments in innovative drugs.

This is because innovative drugs have their particularities: on one hand, they belong to a "life-and-death" business, and even the best companies with the largest market capitalizations can fail on important innovative drugs.

On the other hand, from the perspective of global efficient markets, whether in the United States or Japan, the long-term investment returns of excellent innovative drug companies are impressive.

John Bogle, the founder of Vanguard, believes that the best fund he has managed is the S&P 500, but the innovative drug fund is an exception, being one of the few successful cases in its segmented market ETF, with returns far exceeding the S&P 500.

Therefore, under the premise of an efficient market, index-based investment in innovative drugs has good investment value.

AI applications in 2026 are like real estate in 2006

Question: This year, the AI industry chain has performed prominently in growth styles. The A-share AI industry chain is mainly hardware-based, with strong fundamentals and short-term logic support, while the Hong Kong stock market has gathered a large number of AI application companies. What is your current view on the AI industry chain, especially in the field of AI applications?

Chen Yu: Regarding the top ten predictions for 2026, if I were to write them this year, the first would be "AI applications in 2026 are like real estate in 2006."

In the past one to two years, during the great wave of investment in artificial intelligence, whether in the United States or China, most investors' money has gone into computing power and AI hardware based on it, but currently, few investors have achieved significant returns in AI applications.

We basically judge that next year will be the explosive year for AI applications. As technology implementation progresses, AI applications will become the core focus of the next stage of investment.

On the investment side, whether in A-shares or Hong Kong stocks, there are huge opportunities.

Hong Kong stocks in AI and innovative biopharmaceuticals will have good investment opportunities

In addition, the Hong Kong stock market has obvious advantages, with many high-quality strategic emerging AI companies and innovative biopharmaceutical companies going public in Hong Kong. Next year, Hong Kong stocks around AI and innovative biopharmaceuticals may have good investment opportunities.

The interest rate cut cycle provides a buying opportunity for AI and innovative drugs due to asset price declines

Question: The Federal Reserve has begun a rate cut cycle, while Japan has recently started raising interest rates. What impact will this policy divergence have on the growth and value styles of A-shares? Will the market style in 2026 shift towards balance, further differentiation, or will value lead growth or maintain a growth-leading trend?**

Chen Yu: The essence of interest rate hikes and cuts is the change in market liquidity, but the current A-share market structure is highly differentiated. The investment demand in industries such as AI and innovative pharmaceuticals is increasing day by day— the former focuses on improving productivity, while the latter concerns health and longevity. These long-term industrial trends are less affected by interest rate fluctuations; whether rates rise or fall, investments in these two directions will continue to grow.

For fundamental investors, the valuation adjustments brought about by a rate-cutting cycle may present better layout opportunities, allowing them to seize buying opportunities during asset price declines.

Innovative pharmaceuticals are just the beginning of a twenty-year bull market

Question: Finally, please provide a sentence or two to forecast the market in 2026?**

Chen Yu: First, the AI applications in 2026 are akin to the real estate market in 2006. Moreover, innovative pharmaceuticals are just the beginning of a twenty-year bull market; there may be more exciting developments next year! Source: Investment Workbook Pro Author: Wang Li

For more insights from industry leaders, please follow↓↓↓

Risk warning and disclaimer

The market carries risks, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk