Key Takeaways
China’s technology-focused STAR 50 Index surged more than 8 percent on Monday, as a rally in semiconductor stocks was fueled by stellar local earnings and a projected surge in artificial intelligence spending by US tech titans.
The rally reflects a broader investor pivot towards forward-looking indicators, with global semiconductor sales projected to approach US$1 trillion this year, according to the World Semiconductor Trade Statistics (WSTS).
The ChiNext Index also gained 3.33 percent, while the broader Shanghai Composite Index rose 1.04 percent. Gains were concentrated in the tech sector, with the CSI All-Share Semiconductor Index opening 4.2 percent higher. In contrast, government bond futures fell, with the 30-year contract dropping 0.47 percent, signaling a clear risk-on shift.
The rally underscores a significant sector rotation out of traditional industries and into technology. This shift is driven by expectations that increased AI capital expenditure, which US tech giants are forecast to raise by 77 percent to $725 billion in 2026, will directly benefit China's domestic semiconductor supply chain.
The catalyst for the tech rally was a series of explosive first-quarter earnings reports from domestic chipmakers. Cambricon (688256.SS) saw its shares hit the 20 percent limit-up threshold after reporting a 185 percent year-over-year jump in net profit. Similarly, VeriSilicon (688521.SS) posted a 114 percent revenue increase, driven by a 146 percent surge in its chip customization business.
The positive sentiment was amplified by GPU-related stocks. Haiguang Information (688041.SS) also hit its 20cm price limit, with its market capitalization exceeding 820 billion yuan. The gains align with a global trend, where companies like Samsung and Micro-Mechanics have seen strong performance on the back of relentless demand for AI and memory chips.
The move into technology came at the expense of traditional sectors. Shares of liquor giant Wuliangye Yibin (000858.SZ) slumped 6.5 percent despite the company announcing a share buyback plan of up to 10 billion yuan.
Investors looked past the buyback and focused on the company's 72 percent decline in net profit for the 2025 fiscal year, even as its first-quarter 2026 profit showed a recovery. The divergence highlights a clear investor preference for the high-growth narrative in the tech sector over the value and stability of consumer staples. The sell-off also hit other defensive sectors like petrochemicals and coal.
The risk-on mood was further confirmed by a positive surprise in China's services activity, which expanded at a faster-than-expected pace in April, according to the RatingDog China services PMI. While the Hong Kong market saw more modest gains, with the Hang Seng Index up 0.55 percent, the A-share rally points to growing confidence in China's ability to capture a significant share of the global AI-driven technology boom.
This article is for informational purposes only and does not constitute investment advice.
