China has worked for years to build its own semiconductors, but Macquarie thinks now is the time to buy. “We believe the best time to invest in China’s AI chip players has arrived, given the development of AI, domestic large language model (LLM) players and the token economy in China,” Macquarie’s China Information Technology analysts said in a late June report. “In addition, the PRC Government’s support on domestic AI chip firms (partially via import restriction of Nvidia GPUs which echoes with U.S. export controls) has lifted the growth visibility of domestic leaders,” the analysts said, referring to the Peoples Republic of China. While the U.S. is allowing some less advanced Nvidia chips to be sold to China, China is increasingly less eager to buy them. Huawei and its Ascend chips feature most in discussions about China’s AI-capable semiconductors. The company hasn’t indicated plans to go public. But other players in the sector are already traded in Hong Kong and mainland China. Macquarie initiated coverage on five, with Shanghai-listed Cambricon its favorite, rated outperform. “We believe Cambricon has shifted its core customer base from government intelligent computing clusters to leading domestic cloud providers and LLM developers,” the analysts said. “These customers provide a more balanced sales mix, healthy margins and solid cash flows.” Macquarie has a price target of 2,060 yuan ($303.43), equivalent to more than 50% from Friday’s close. Among Hong Kong-listed China AI chip stocks, Macquarie prefers Biren Tech and has a price target of 140 Hong Kong dollars ($17.85) — more than double Friday’s close. “We like Biren’s [General-Purpose computing on a Graphics Processing Unit] product portfolio skewed towards higher computational power, chip interconnect, and large-scale computing clusters,” the analysts said. “Moreover, the company’s focus on the domestic supply chain is likely to bear fruit to facilitate its new product launch.” Other favorites include Hong Kong-listed Iluvatar CoreX, followed by Shanghai-listed MetaX. Macquarie’s least favorite stock in the group is Shanghai-listed Hygon, due to concerns about market share losses. “Hygon is well-positioned in China’s CPU and AI chip sector, though we attribute much of its success to tech transfer from AMD, and we see limited upside for the sector from agentic AI development,” the Macquarie analysts said. They rate Hygon underperform. Alibaba and Baidu also have subsidiaries that make AI chips. But Huawei remains the giant in terms of deliveries. Cambricon ranked a distant second to Huawei’s Ascend in terms of AI chip shipments last year, the Macquarie report said, citing IDC. Hygon ranked third, the report said. — CNBC’s Michael Bloom contributed to this report.
