01 Surface Insight: State Intervention as a Direct Multiplier

Data indicates that state intervention has triggered a massive rerating of the Semiconductor and Defense sectors in both the U.S. and China.

• United States: Between 2018 and 2024, Semiconductor P/E multiples surged from 11x to 35x (+218%), while Defense rose from 15x to 35x (+133%).

• China: The Hang Seng China Semiconductor Index saw its P/E jump from 63x in April 2023 to a peak of 135x by September 2025 (+114%).

• Conclusion: Key legislative milestones (e.g., the CHIPS Act, IRA, and China’s Big Fund Phase III) align perfectly with these valuation spikes, confirming policy as the primary engine for multiple expansion.

02 Deep Logic: The "State Capitalism" Rerating Framework

"State Capitalism"—defined here as government-led industrial policy and resource allocation—is fundamentally restructuring valuation logic through three mechanisms:

1. Risk Repricing: Government as the "Underwriter of Uncertainty"

   Traditional models (DCF/PE) struggle with the high-stakes, long-cycle nature of Tech and Defense. Governments are now mitigating these risks by "insuring" technical breakthroughs.

   • The U.S. Model: Through $52B in subsidies and 25% tax credits, the state de-risks corporate cash flows, encouraging private capital to pay a premium for "policy-guaranteed growth."

   • The China Model: Big Fund III (RMB 344B) and the STAR Market use state capital to mobilize social investment, alleviating the existential "chokehold" (technological blockade) risk for domestic firms.

     
     

2. Strategic Priority: National Security Over Market Efficiency

   The narrative has shifted from "Commercial Viability" to "National Strategic Asset."

   • The U.S. Perspective: Semiconductors and Defense are viewed as the core of great-power competition, leading markets to value strategic scarcity over immediate bottom-line performance.

   • The China Perspective: "Self-reliance" places security above short-term profitability. The valuation surge (63x to 135x) reflects the weight of strategic value—the "irreplaceability" of autonomous supply chains—rather than explosive earnings growth.

     
     

3. Capital Concentration: Policy as a Magnet for Global Liquidity

   Industrial policy creates "Certainty Havens" that attract global capital.

   • In the U.S., post-2022 trends show capital chasing the "policy endorsement" of high-growth tech.

   • In China, the "New Whole-Nation System" has turned the STAR Market and Semiconductor sectors into "crowded trades" for both domestic and international investors betting on China’s technological breakout.

03 Underlying Conflict: The Failure and Reconstruction of Valuation Models

The traditional valuation paradigm—premised on free-market competition and earnings predictability—is increasingly obsolete for strategic sectors.

• The Shift: We are moving from Earnings-Driven to Strategy-Driven valuations.

• New Anchors: Under "State Capitalism," the core valuation anchors are now policy dividends, strategic importance, and state-backed risk mitigation.

• Future Outlook: Valuations for global Tech and Defense will increasingly depend on the degree of state control and resource commitment rather than traditional free-market profitability models.