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2026-10-12 18:13:43 G Sachs released a research report stating that since the DeepSeek moment in early 2025, China AI-related listed companies have created nearly USD5 trillion in market capitalization through share price gains and IPOs. AI stocks now account for 42% of total market capitalization and 57% of trading turnover in the A-share and H-share markets, indicating AI has reshaped the landscape of China's stock market. The broker noted that investors are increasingly focusing on the narrative of a global AI duopoly, namely two independent AI ecosystems led respectively by the US and its major trading partners, and by China. China has long been a key exporter in the global AI supply chain, holding more than 50% global market share in areas including rare earth production/refining, power equipment, PCBs, optical modules and mature-node semiconductors. With the development of domestic AI technologies, China has gradually established a self-contained AI value chain covering advanced semiconductors, open-source large language models and application layers, positioning itself to compete with the US-centric AI ecosystem. The broker estimated that the AI business exposure-weighted market capitalization of Chinese AI companies stands at about USD7.6 trillion, accounting for around 10% of global AI-related market capitalization and earnings, 14% of capital expenditure, and 24% of revenue. The broker divided Chinese AI stocks into two major themes. The first consists of more than 360 export-oriented enterprises with a combined market capitalization of approximately USD1.7 trillion. Overseas revenue accounts for more than 40% of their sales, and most belong to AI infrastructure and power sectors, making them proxies for the Western AI capital expenditure boom. The second consists of more than 880 companies mainly serving domestic demand, with a combined market capitalization of around USD3.2 trillion and overseas revenue contribution below 10%. These firms are benefiting from rising AI capital expenditure by domestic hyperscale cloud service providers, explosive growth in application demand, and policy support for technological self-sufficiency. Export-oriented AI stocks generated cumulative returns of 126% from early 2025 to June 2026, outperforming domestic-demand peers by about 84 ppts. However, since the global AI correction at the end of June, they have retreated 23% from peak levels, narrowing the relative advantage by around 10 ppts. In terms of investment strategy, despite acknowledging geopolitical and trade policy risks, the broker remains positive on China's AI export leaders, covering 20 stocks with an average overseas revenue contribution of 66% in 1H26. Based on market expectations, these firms are projected to deliver a two-year EPS CAGR of 38%, with a 2027 price-to-earnings ratio of 21x. The broker also selected 20 domestic AI champions, with more than 90% of sales generated from mainland China on average, expected to achieve a future earnings CAGR of 33% and a forward P/E ratio of 23x. The broker also updated its "China AI Focus List" to 50 stocks, covering five major layers including power, semiconductors, infrastructure, models and applications. The equal-weighted portfolio is currently trading at 31x forward 12-month P/E, with market expectations for 46% earnings growth over the next two years, and approximately 58% of revenue directly related to AI businesses. Details are listed below. The broker cautioned that significant gaps still remain between the China and US AI value chains in terms of market capitalization, profitability and product pricing. Bottlenecks in the domestic supply chain and the scaling characteristics of AI technology mean that achieving full AI self-sufficiency in China will remain a long and challenging journey. G Sachs' updated "China AI Focus List" of 50 stocks is as follows: Stock|Rating Power WEICHAI POWER (02338.HK)|Buy (included in Conviction List Buy) YINGLIU (603308.SH)|Buy KSTAR (002518.SZ)|Buy CATL (03750.HK)|Buy SIEYUAN ELEC (002028.SZ)|Buy *HONGFA (600885.SH)|Buy Semiconductors *SYTECH (600183.SH)|Buy (included in Conviction List Buy) ANJI TECHNOLOGY (688019.SH)|Buy SICC (02631.HK)|Neutral *SMIC (00981.HK)|Buy HUA HONG GRACE (01347.HK)|Buy VERISILICON (688521.SH)|Buy *ILUVATAR COREX (09903.HK)|Buy BIREN TECH (06082.HK)|Buy CAMBRICON (688256.SH)|Buy *CXMT (688825.SH)|Buy GIGADEVICE (03986.HK)|Buy MONTAGE TECH (06809.HK)|Buy NAURA (002371.SZ)|Buy AMEC (688012.SH)|Buy *HWATSING TECHNOLOGY (688120.SH)|Neutral *INNOSCIENCE (02577.HK)|Buy *CHANG ELEC TECH (600584.SH)|Neutral EMPYREAN (301269.SZ)|Neutral Infrastructure ENVICOOL (002837.SZ)|Buy *LUXSHARE ICT (02475.HK)|Buy *RANGE TECHNOLOGY (300442.SZ)|Buy *KINGSOFT CLOUD (03896.HK)|Buy ZJ INNOLIGHT (03308.HK)|Buy EOPTOLINK (300502.SZ)|Buy TFC (300394.SZ)|Buy SHENNAN CIRCUITS (002916.SZ)|Buy WUS CIRCUIT (002463.SZ)|Buy VGT (02476.HK)|Buy FOXCONN INDUSTRIAL INTERNET (601138.SH)|Buy AI Large Models KNOWLEDGE ATLAS (02513.HK) CEO Zhang Peng|Buy MINIMAX-W (00100.HK)|Buy SENSETIME-W (00020.HK)|Neutral Applications (AI+) BABA-W (09988.HK)|Buy TENCENT (00700.HK)|Buy WUXI APPTEC (02359.HK)|Buy ASYMCHEM (06821.HK)|Buy HUNDSUN TECHNOLOGIES (600570.SH)|Buy Applications (Physical) *BYD COMPANY (01211.HK)|Buy (included in Conviction List Buy) HESAI-W (02525.HK)|Buy *HORIZONROBOT-W (09660.HK)|Buy *LENOVO GROUP (00992.HK)|Buy SANHUA (02050.HK)|Buy *LINGYI ITECH (01688.HK)|Buy SHUANGHUAN DRIVELINE (002472.SZ)|Buy *New additions Stocks removed from the list include KUAISHOU-W (01024.HK), PONY-W (02026.HK), XPENG-W (09868.HK), XIAOMI-W (01810.HK), HAN'S LASER (002008.SZ), GDS-SW (09698.HK), VNET Group, Inc. (VNET.US), and METAX (688802.SH), among others. (da/U)~ AASTOCKS Financial News Website: www.aastocks.com This article was automatically translated by AI, the Chinese version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. | |