China’s chip stocks have staged a world-beating rally in the past few months on the nation’s self-sufficiency push, but some investors are beginning to balk at their lofty valuations.
Mirroring the US dynamic, China’s semiconductor industry is seen as the key beneficiary of a national drive to dominate the tech landscape being shaped by artificial intelligence (AI). With much talk of an AI bubble of late in the US, China’s even fatter valuations are spurring caution.
“Such high multiples are not leaving much margin for error, and I doubt that the market will have much patience if they cannot deliver,” said Ng Xin-Yao, a fund manager at Aberdeen Investments.
A gauge of Chinese semiconductor shares has surged 55 per cent since the end of June, while measures of chip stocks in the US, Japan, South Korea and Taiwan are up around 20 to 30 per cent. The outperformance has come on Beijing’s support for domestic tech and a plea for firms to avoid using Nvidia processors.
The effort is gathering pace, with Huawei Technologies and Alibaba Group Holding rolling out their own chip designs in recent months. SMIC is reportedly testing the country’s first domestically produced advanced chipmaking equipment, posing a threat to overseas makers.
