In recent months, the Chinese A-share market has seen a significant surge in interest and investment in chip stocks and related sectorsThis trend is largely attributed to the rapid acceleration of artificial intelligence (AI) application technologies, rising product prices, and the launch of groundbreaking chips by leading industry playersPlayers like the National Integrated Circuit Industry Investment Fund, also known as the “National Big Fund,” and giant tech company Huawei have been actively investing in and supporting these chip companies, signaling a robust confidence in the future of this sector.

The landscape for chip stocks has become increasingly buoyant since the market began its reboundAccording to the Wind Chip Index, from February 6 to March 22, the index jumped by an impressive 40%, greatly outperforming the nearly 11% increase of the Shanghai and Shenzhen 300 Index during the same timeframe

Such performance speaks volumes about the mounting enthusiasm around the semiconductor industry as investors look to capitalize on its growth potential.

Fueled by the AI revolution, the trillion-yuan chip sector is positioned for explosive growthOn March 19, Nvidia, a global leader in the chip domain, unveiled its next-generation AI chip architecture named BlackwellSet to be available later this year, the Blackwell chip utilizes a cutting-edge 4NP process to connect two GPU die together, boasting AI performance levels that could reach two-and-a-half to five times that of the current Hopper chips, earning the title of “the world's strongest AI chip.” This kind of innovation exemplifies the relentless push for advancements in computing power that underpins AI technologies.

Additionally, on March 14, Cerebras Systems, a California semiconductor firm, announced its newest wafer-scale AI acceleration chip dubbed WSE-3. This chip astonishingly delivers peak AI performance of about 125 PFlops, enabling it to complete the training tasks for Llama’s 70 billion parameter model in just a single day, highlighting the relentless march towards breaking existing performance barriers within the AI field.

AI chips, which are tailored for specific computing needs related to artificial intelligence, have rapidly emerged as essential components in smart devices

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The ongoing development of AI and chip technologies is synergistically interacting with exploding demand in various sectors including intelligent robotics, cloud computing, autonomous driving, and smart consumer electronicsThe demand is creating a perfect storm for chip manufacturers, propelling them into a critical phase of acceleration and growth.

China's AI chip industry has witnessed impressive advancements recentlySeveral A-share listed companies are ramping up their commitments to the AI chip supply chainFor instance, Cambricon reported that by mid-2023, it had successfully completed the development of the second generation of its high-end cloud-based smart chips and had also made substantial progress with the fourth generation of mid-range cloud smart chipsAnother company, Guoke Micro, has focused on developing edge AI chip products while also making strides with its self-developed NPU architecture in video coding products, which now fully covers computing ranges from 0.5T to 8T

Meanwhile, 4D Mapping has been planning to ramp up the development of AI chips and ecosystem buildouts.

The market response has been overwhelmingly positive, with many related companies gaining significant attention and their stock prices performing wellSince February 6, numerous stocks in this sector have surged over 50%, demonstrating robust market enthusiasm.

Another pillar of strength within this dynamic sector is the National Big Fund, which has intensified its focus on chip stocksThe fund's strong presence was particularly noted in the significant shareholders of chip companies recentlyFor example, on March 19, Zhongwei Corporation released its 2023 financial report indicating the National Big Fund had maintained its substantial holdings, with 24.44 million shares unchanged since the third quarter of 2023. Zhongwei specializes in high-end semiconductor and related equipment, and its financial figures bear testament to this trend, showcasing a net profit of over 1.78 billion RMB—a year-on-year growth of approximately 52.67% that correlates with a sharp increase in new orders in the past year.

Additionally, ShenNan Circuit, another notable player in the chip manufacturing space, revealed its stake in the National Big Fund in its recent financial disclosures

The company, a producer of printed circuit boards and packaging substrates, has benefited from ramped-up demand from clients, resulting in an order growth where its stock price surged by over 80% since February 6.

The actions of the National Big Fund reflect a strategic investment in the future of technology, as seen in its increasing stakes in companies like Tuojing Technology, Chipone Technology, Guoke Micro, and Baiwei Storage, further signifying its commitment to the sectorThese companies possess integral roles in the AI industry chain, indicating a deliberate focus on fostering growth and innovation.

Moreover, tech giant Huawei has also doubled down on investments within the chip sphereRecently, its investment platform, Hubble Technology Venture Capital, announced a capital increase from 7 billion to 7.98 billion RMBAs Huawei reshapes its strategy to prioritize chip technology and AI developments, Hubble Technology has consistently emerged as a key investor in several listed chip companies.

For instance, on March 8, due to a share buy-back announcement, Yutaiwei disclosed that Hubble Technology remains one of its top shareholders

The recent resurgence in Yutaiwei shares, which saw a rapid increase of over 90% from February 6 to March 18, underscores the optimism surrounding the chip market.

Other companies such as Yuanjie Technology have similarly attracted Hubble's investment support, indicating a pattern where Hubble’s presence in shares has become a regular occurrenceFor example, Yuanjie is involved in the optical chip sector, with products that cater to high-speed optical modules as demand escalates due to AI advancements.

The current investment climate reflects a harmonious convergence of technological innovation, robust demand, and strategic investments as key stakeholders double down on the bright prospects of the chip industryThe example of Hubble Technology investing across multiple chip companies reflects the broader trend of support from major players in the industry, and the resulting confident market sentiment signals that the journey for semiconductor stocks in the face of an AI-driven future is just beginning.

As investors navigate through this rapidly evolving landscape, it is important to recognize that such stock movements are significant but do not serve as direct buy or sell recommendations