Macquarie Identifies Prime Opportunity in Chinese AI Semiconductor Sector, Names Top Pick

China has dedicated years to advancing its domestic semiconductor capabilities, and Macquarie analysts suggest that the timing is now ideal for investors to enter the market. In a report released in late June, Macquarie’s China Information Technology analysts stated, “We believe the best time to invest in China’s AI chip players has arrived, driven by the evolution of AI, the rise of domestic large language model (LLM) developers, and the emerging token economy in China.”

The analysts further noted that government support for domestic AI chip manufacturers—bolstered in part by U.S. export controls on Nvidia GPUs—has significantly increased the growth visibility for industry leaders within the People’s Republic of China. While the United States permits the sale of certain lower-tier Nvidia chips to China, Chinese demand for foreign hardware is steadily declining.

While Huawei and its Ascend chip series dominate discussions regarding China’s AI semiconductor landscape, the company has not announced plans for an IPO. However, several other significant players in the sector are already publicly traded in Hong Kong and mainland China.

Macquarie has initiated coverage on five companies, naming Shanghai-listed Cambricon as its top pick with an “outperform” rating. “We believe Cambricon has successfully transitioned its primary customer base from government intelligent computing clusters to leading domestic cloud providers and LLM developers,” the analysts noted, adding that this shift provides a more balanced sales mix, healthier margins, and more consistent cash flows. Macquarie has set a price target of 2,060 yuan ($303.43) for Cambricon, representing a potential gain of over 50% from its recent closing price.

Regarding Hong Kong-listed stocks, Macquarie favors Biren Tech, assigning it a price target of 140 Hong Kong dollars ($17.85)—more than double its Friday close. The analysts highlighted Biren’s GPU product portfolio, which emphasizes high computational power, chip interconnectivity, and large-scale computing clusters. They also noted that the company’s dedication to the domestic supply chain is expected to support successful new product launches.

Other recommended holdings include Hong Kong-listed Iluvatar CoreX and Shanghai-listed MetaX. Conversely, Macquarie’s least favored stock in this group is Shanghai-listed Hygon, which has been assigned an “underperform” rating due to concerns regarding potential market share erosion. “Hygon is well-positioned in China’s CPU and AI chip sector, though we attribute much of its success to technology transfers from AMD, and we see limited upside for the sector from agentic AI development,” the report stated.

While subsidiaries of major tech giants like Alibaba and Baidu also produce AI chips, Huawei remains the dominant force in terms of volume. According to IDC data cited in the Macquarie report, Cambricon ranked a distant second to Huawei’s Ascend in AI chip shipments last year, with Hygon trailing in third place.

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