Key Takeaways:
Shares of Hua Hong Semiconductor (01347.HK) fell 9.055 percent even as BOCI Securities raised its price target on the chipmaker by 31 percent to HKD152.4, citing a positive outlook for the domestic artificial intelligence supply chain.
"Fostering domestic AI computing capacity remains a policy priority, and the bank continues to stay positive on the domestic AI computing supply chain," BOCI said in its report, maintaining a "Buy" rating on the stock. The firm lifted its target price-to-book multiple for Hua Hong from 4x to 5x.
The analyst upgrade was overshadowed by reports that the United States has approved sales of Nvidia’s H200 AI chips to approximately 10 Chinese technology companies, sparking fears of heightened competition for domestic producers like Hua Hong. The list of approved buyers reportedly includes Alibaba, Tencent, ByteDance, and JD.com. Despite the US approvals, no H200 chips have been delivered to Chinese buyers to date.
The divergence between the analyst action and the market reaction highlights deep uncertainty over the future of China’s domestic AI chip industry. While BOCI’s upgrade was based on strong demand for AI infrastructure and industry-wide price increases, investors focused on the potential impact of renewed access to high-end Nvidia chips for China’s largest tech firms. According to reports, each approved customer may purchase up to 75,000 chips.
Market concerns reflect the competitive threat posed by Nvidia, which commanded about 95 percent of China's advanced chip market before US export curbs tightened. However, BOCI noted the key bottleneck remains on the Chinese side. Beijing has reportedly been reluctant to authorize the purchases, instead encouraging firms to use homegrown AI chips, such as those from Huawei, as it pushes to develop its own domestic capabilities.
The sell-off in Hua Hong shares puts the stock at its lowest level since its tepid 1Q26 results were announced. Investors will be closely watching for any official statements from Beijing regarding the Nvidia H200 import approvals, which will be the next major indicator for the domestic semiconductor sector.
This article is for informational purposes only and does not constitute investment advice.
