Following a recent policy meeting in China, it has become increasingly evident that Beijing is placing a strong emphasis on building up domestic technology capabilities. This strategic move highlights the country’s desire to reduce reliance on foreign technology and establish its own foothold in the tech industry. This shift in focus has significant implications for various sectors, particularly in semiconductor and artificial intelligence.
Goldman Sachs analysts have identified notable catalysts for certain semiconductor and artificial intelligence China stock plays from August to December. With the upcoming launch of new Chinese smartphones, AI PCs, and a new iPhone cycle, there is considerable potential for growth in this sector. In fact, semiconductor names experienced substantial inflows last week, indicating a growing investor interest in Chinese tech stocks. This trend is further bolstered by China’s plans to accelerate the development of “emerging and future industries” and enhance tech talent within the country.
China’s growing focus on self-sufficiency is also influenced by U.S. restrictions on the export of advanced chipmaking equipment to China. This has led to declines in the stock prices of companies such as ASML, Nvidia, and Taiwan Semiconductor. The Biden administration’s consideration of a wider clampdown on tech exports further underscores the challenges faced by Chinese tech companies. However, this shift in policy has also created opportunities for domestic tech production equipment stocks to thrive.
Goldman analysts have expressed optimism about the growth prospects of Chinese semiconductor companies, particularly fabless companies that design chips but outsource the manufacturing process. They anticipate revenue growth for these companies supported by a favorable consumer electronics market and a gradual demand recovery. Key areas of focus for investors include market share gainers and companies specialized in mature nodes to mitigate geopolitical risks.
Goldman Sachs has buy ratings on several Chinese companies in the semiconductor industry, including U.S.-listed ACM Research and Shanghai-listed AccoTest. These companies are expected to experience significant upside potential in the coming months. Additionally, investments in fabless companies like Montage and Will Semiconductor are viewed favorably by analysts, with expected returns of up to 27% and 19% respectively.
China’s shift towards promoting domestic tech capabilities presents both opportunities and challenges for investors. By aligning investment strategies with the country’s priorities and focusing on key sectors such as semiconductors and artificial intelligence, investors can capitalize on the growing momentum in China’s tech industry.