China has made significant progress in developing its semiconductor industry, especially in the realm of artificial intelligence (AI) chips. Macquarie analysts believe this is an opportune time for investment in China’s AI chip sector, citing advancements in AI, the emergence of domestic large language model (LLM) developers, and strong government support for local firms. The People’s Republic of China has restricted imports of certain Nvidia GPUs, which parallels U.S. export controls, enhancing the growth potential of homegrown companies.
While the U.S. allows some less advanced Nvidia chip sales to China, demand from Chinese firms has dwindled. Huawei’s Ascend chips are at the forefront of discussions regarding China’s AI capabilities, although Huawei has not announced plans for an initial public offering. Other companies in the industry are publicly traded in Hong Kong and mainland China. Macquarie initiated coverage on five of these firms, with Shanghai-listed Cambricon being the preferred choice, rated "outperform." Analysts highlight Cambricon’s recent shift towards servicing domestic cloud providers and LLM developers, which offers a more diverse sales mix and stable revenue streams.
Macquarie places a price target of 2,060 yuan ($303.43) on Cambricon, reflecting a potential growth of over 50%. In Hong Kong, Biren Tech is another favored stock with a price target of 140 Hong Kong dollars ($17.85), representing more than double its previous close. Other notable companies include Iluvatar CoreX and MetaX, while Hygon has received a weaker assessment due to concerns over market share, despite its position in the CPU and AI chip sectors.
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