Mainland China's three major stock indices strengthened collectively today (August 17), with the Shanghai Composite Index climbing 1.41% to close at 3,982.65 points, the Shenzhen Component Index advancing 2.44%, and the ChiNext Index jumping 3.14%. Combined turnover on the Shanghai and Shenzhen exchanges reached 2.39 trillion yuan, expanding by more than 240 billion yuan compared with the previous trading day.
On the trading front, AI-related themes continued their aggressive advance. Semiconductor chips staged a strong rebound, with the HUABAO SHANGHAI SCI TECH INNOVATION BOARD CHIP TRADING OPEN ENDED INDEX SECURITIES INVESTMENT FUND (589190), which holds nearly half of its portfolio in storage chip names and carries a comparatively low fee structure, surging 5% in intraday trading. CPO concept stocks rallied collectively, and the ChiNext AI ETF (159363), which heavily weights CPO leaders, climbed steadily in the afternoon to close up 3.96%. The Electronics ETF (515260) and the Sci-Tech Innovation AI ETF (589520) also performed strongly, each closing up more than 3%.
In Hong Kong, hard-tech stocks advanced steadily. The Hong Kong Stock Connect Information Technology ETF (159131), the largest and most liquid among its peers, closed up 2.4%. CXO names made a strong comeback, with the Hong Kong Stock Connect Healthcare ETF (159137) rising as much as 3.5% intraday before closing up 2.23% on heavy volume, posting a single-day turnover of 125 million yuan, its highest level in seven months.
Where the momentum is building
Brokerages suggest that after the sharp market pullback in July, accelerated domestic investment policy implementation in August and robust July export data are expected to support a sequential rebound in third-quarter GDP growth versus the second quarter. Short-term attention is directed toward AI-related sectors with strong fundamentals and service consumption areas benefiting from policy support. Analysts also highlight three main investment directions: the technology opportunity from the AI industrial revolution spanning computing power, storage, power, and applications; the strong-get-stronger style leadership amid gradual economic recovery, with cyclical sectors potentially performing later in the cycle; and a risk-reward approach that considers style rotation and bottom-reversal possibilities. Notably, sectors that underperformed for three consecutive years but have a higher probability of outperforming in the fourth include food and beverage, agriculture and fisheries, social services, and pharmaceuticals and biotech.
Memory chip shortage warnings fuel chip ETF rally
Semiconductor chips rebounded strongly, with memory chip names leading the charge. ChangXin Memory Technologies closed up 12% at a record high, pushing its market value back above the 4 trillion yuan mark. The HUABAO SHANGHAI SCI TECH INNOVATION BOARD CHIP TRADING OPEN ENDED INDEX SECURITIES INVESTMENT FUND (589190), which holds nearly half its portfolio in storage chips and charges a lower fee than peers tracking the same index, surged 5% intraday, marking a fresh high since the August rebound. Semiconductor equipment, optical chip, storage, and wafer fabrication names all advanced, with Zhongke Feice, Shijia Photon, PRAM, and Fengdi Technology leading with double-digit gains. VeriSilicon rose over 9%, while Nexchip Semiconductor and SICC climbed over 8%. GigaDevice Semiconductor and Huafeng Test Control advanced over 7%.
On the news front, SK Hynix announced a $38.4 billion investment to build a wafer fab in South Korea to address surging memory demand in the AI era. SK Group Chairman Chey Tae-won recently reiterated expectations of explosive storage demand growth and warned of the most severe memory shortage next year. Earlier reports indicate that Samsung, SK Hynix, and Micron have already fully locked up their 2027 capacity for HBM and high-end DRAM. As China's largest integrated DRAM design and manufacturing enterprise, ChangXin Memory Technologies, with a 7.67% global market share in 2025, is well positioned to benefit from the global memory shortage and boost the domestic semiconductor chip industry.
Brokerages note that the storage industry is in a super cycle driven by AI computing power, characterized by tight supply-demand dynamics and simultaneous volume and price increases. On the demand side, AI model iteration and accelerated computing infrastructure buildout are significantly lifting demand for HBM, DRAM, and enterprise flash storage. On the supply side, memory makers are tilting 2026 expansion resources toward high-value-added HBM products, leaving limited effective supply growth for traditional DRAM and NAND flash, thereby widening the industry-wide supply-demand gap.
Additionally, during the interim earnings disclosure period, multiple chip giants including SMIC, Hygon Information, and Hua Hong Semiconductor have reported results that significantly exceeded expectations. Strong earnings beats and optimistic guidance for the next quarter are expected to provide meaningful support for the semiconductor chip sector's repair and rebound. Market strategists believe the oversold bounce is entering a mid-stage, with overseas risk appetite strengthening amid fading Fed rate hike expectations and progress on the Oman-Iran Strait passage agreement. Domestically, as the interim earnings season intensifies, the high prosperity of technology earnings will continue to be validated, supporting the extension of the rebound.
Nvidia CPO announcement ignites optical interconnect rally
Nvidia's official announcement of mass production for CPO switches triggered a broad rally in CPO concept stocks. Taircheng hit the 20% daily limit, Changxin Bochuang rose over 12%, Tianfu Communication gained over 7%, Zhongji Innolight advanced over 6%, and Eoptolink climbed over 4%. The ChiNext AI ETF (159363), which heavily weights CPO leaders, rallied across the board in the afternoon, closing up 3.96% with a single-day turnover of 1.582 billion yuan, while attracting net subscriptions of 30 million units.
Nvidia's move signals that AI data center interconnect is accelerating its shift from electrical to optical transmission. Co-packaging switch chips with optical engines significantly reduces power consumption and latency, serving as a critical foundation for next-generation clusters of 10,000 to 100,000 GPUs. This industry inflection point opens incremental space for the entire optical interconnect chain, transitioning from theme-based expectations to order fulfillment. Analysts indicate that Nvidia's Spectrum-X Ethernet silicon photonic switches are now in full production, with the Feynman architecture further evolving toward CPO, SoIC, and higher-bandwidth interconnect structures. Expanding AI cluster scale is expected to continuously boost demand for optical modules, lasers, and silicon photonic devices.
Within the CPO optical interconnect value chain, optical components and optical engines represent the core incremental segments. Tianfu Communication, a company deeply engaged in precision optical communication components, participates extensively in CPO-related optical engine supporting infrastructure and is expected to directly benefit from component demand during this ramp-up phase.
CXO sector resurges as pharmaceutical leaders hit new highs
After just one day of consolidation, CXO names in both A-shares and Hong Kong stocks mounted a strong comeback. WuXi AppTec's A-share and H-share both set new historical highs. Kailaiying's A-shares rose 3.46% and H-shares gained 6.56%; Joinn Laboratories' A-shares advanced 4.25% and H-shares climbed 6.3%; GenScript Biotech closed up 4.82% in Hong Kong, extending its winning streak to nine gains in ten sessions. The Hong Kong Stock Connect Healthcare ETF (159137), whose underlying index has the highest CXO concentration in the market at 52.5%, rose as much as 3.5% intraday before closing up 2.23% on volume, posting a single-day turnover of 125 million yuan, a seven-month high. The Healthcare ETF (512170), the largest in its category, with CXO content exceeding 30%, recorded its sixth gain in seven sessions.
The healthcare sector has been repairing steadily since its late-June bottom and is now showing relative outperformance. The CSI Healthcare Index has rebounded approximately 20% from its June low, while the CSI 300 has remained roughly flat over the same period. CXO and innovative drug chains remain active, with signs of continued fund rotation into healthcare. As of August 14, the CSI Healthcare Index's forward P/E (TTM) stood at approximately 31.4 times, elevated from earlier levels but still near the 29th percentile of its valuation range over the past decade, indicating historically low overall valuation levels.
From a policy perspective, support for innovative drugs has been further strengthened. The 2026 medical insurance drug catalogue and commercial insurance innovative drug catalogue adjustments have completed expert review, with a batch of drugs recognized for clinical value and innovation entering subsequent processes such as negotiation and renewal. Corporate material submission and pricing negotiation phases are underway, with results expected by the end of November. The dual-track mechanism of medical insurance plus commercial insurance, along with innovative drug price protection measures, continues to improve industry expectations. On the industry front, China's innovative drug out-licensing deals in the first half of 2026 reached approximately 81 transactions totaling about $110 billion, already reaching roughly 80% of the full-year 2025 figure. This BD momentum is transmitting into CXO orders and commercialization execution. In early August, a US court approved a preliminary injunction related to the 1260H designation involving WuXi AppTec, providing temporary relief from geopolitical tensions and further boosting CXO sector sentiment.
Interim results are validating the strength of innovative drug and CXO leaders. WuXi AppTec reported first-half revenue of approximately 28.9 billion yuan (up about 39% year-over-year) and net profit attributable to shareholders of approximately 11.1 billion yuan (up about 29%), while raising its full-year revenue guidance to 58.5-60.5 billion yuan. Its continuing operations backlog stands at approximately 66.4 billion yuan (up about 25% year-over-year). BeiGene reported first-half revenue of approximately 22.2 billion yuan (up about 27%) and net profit of approximately 3.3 billion yuan (up over 600%), raising its full-year revenue guidance to 44.9-46.2 billion yuan. Other companies including RemeGen, Innovent Biologics, and Haisco Pharmaceutical also reported high growth or turned profitable on product volume expansion and licensing revenue recognition.
Public fund second-quarter 2026 reports show healthcare accounted for approximately 6.4% of active equity heavy positions, down to multi-year lows. After this chip clearing, the scope for further systematic underweighting is relatively limited. Given that healthcare valuations remain historically low after years of adjustment, policy has shifted from suppression to support for innovation, interim results and BD/order data validate upward momentum, and geopolitical tensions have eased with public funds underweighted, the sector warrants continued attention.
For investors tracking the healthcare repair, two key vehicles stand out. The Healthcare ETF (512170), the largest medical and healthcare ETF in the market, focuses on medical devices and services while incorporating AI healthcare, with CXO content reaching 32.82%, including WuXi AppTec (A-shares) at 13.42%. The Hong Kong Stock Connect Healthcare ETF (159137) heavily weights the innovative drug supply chain with CXO content exceeding 50%, including WuXi-related names at over 38%, while also covering JD Health and rare leaders in internet healthcare and AI pharmaceuticals. Its underlying assets are Hong Kong-listed, offering high elasticity and T+0 trading.
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