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.
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.
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.
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.
