The emergence of artificial intelligence (AI) has predominantly spotlighted advanced semiconductors; however, many companies listed in mainland China play a vital role in producing essential components for data centers. According to analysts Michael Hirson and Houze Song from 22V Research, the United States imports nearly 30% of its AI-related products from Chinese firms. While China is unable to manufacture advanced chips at scale, it is crucial for supplying components like energy storage solutions, transformers, critical minerals, and chemicals that support the data center supply chain.
AI-related exports have been instrumental in driving China’s overall export growth this year, with Shenzhen-listed companies showing significant market performance. Notably, the ChiNext index, which tracks companies in Shenzhen, has doubled in the past year. The 22V Research analysis of the CSI 300 index reveals that among the top ten AI supply chain companies by market capitalization, all but one have seen their shares at least double within the last twelve months.
Key players in this market include battery manufacturer CATL, printed circuit board suppliers like Victory Giant and Dongshan Precision, and manufacturers of multilayer ceramic capacitors such as Sanhuan Group. Emerging technologies, particularly optical components, have been highlighted as pivotal; data centers require high-speed connections that utilize extensively more fiber than traditional server rooms.
Despite still being valued lower than U.S. tech companies, Chinese tech firms are experiencing heightened local investor interest. This trend, illustrated by significant share price increases for companies such as InnoLight and Foxconn Industrial Internet, indicates an expanding market presence.
Why this story matters: Highlights the critical role of Chinese companies in the global AI supply chain amidst geopolitical tensions.
Key takeaway: China is increasingly becoming integral to the production of essential components for AI, despite its limitations in advanced chip manufacturing.
Opposing viewpoint: Some analysts question the sustainability of investment in Chinese tech firms amid potential regulatory and market risks.
