CITIC SEC has released a research report outlining its outlook for the second half of 2026, highlighting several promising investment themes.
The report identifies AI new materials, defense new materials, solid-state batteries, nuclear fusion, and hydrogen energy as areas expected to see significant activity.
In AI new materials, the focus is on technological breakthroughs and surging demand, with an emphasis on domestic substitution and the growth of leading companies.
Chemical new materials are poised for a period of rapid growth, driven by green decarbonisation and recycling initiatives.
Lightweight materials are seeing demand gradually increase, fueled by the dual drivers of embodied AI and the commercial space sector.
New energy materials are being developed across multiple dimensions, with attention on commercial progress and earnings realisation.
The firm expresses optimism about trading opportunities driven by policy, events, and earnings catalysts, recommending a proactive approach to investing in high-growth industries and premium sectors within the relevant supply chains.
Key Investment Sectors for the Coming Period
For AI new materials, the report details several sub-sectors. In advanced packaging materials, a capacity shortage may persist until the second half of 2027, with potential excess returns from the most constrained and difficult-to-replace material nodes.
Five main areas to watch are ABF/CBF substrates, CMP materials, specialty chemicals, EMC, and glass substrates.
In PCB materials, computing power upgrades are driving material evolution, with M7-grade and above copper-clad laminates boosting demand for specialty resins like PPO and hydrocarbon.
With overseas leaders expanding capacity slowly, domestic firms are accelerating their substitution efforts.
The market for overseas AI-grade resins is projected to reach 3.7 billion and 7.1 billion yuan in 2026 and 2027, respectively, with M9-grade showing the fastest growth.
Domestic resin manufacturers integrated into high-end supply chains and with expansion capabilities are viewed favorably.
For wafer fabrication materials, AI is expected to drive significant global spending on 300mm fab equipment from 2027 to 2029, boosting demand for manufacturing materials.
The memory sector is entering a super-cycle, with companies like CXMT accelerating expansion, benefiting domestic material substitution.
Semiconductor silicon wafers are expected to see both volume and price increases in 2026, with AI demand for 12-inch wafers becoming a key growth driver.
Substitution of domestic 12-inch wafers is accelerating. Other materials with pricing potential include helium, tungsten hexafluoride, and nitrogen trifluoride.
AI liquid cooling materials are gaining traction as chip power exceeds air cooling limits, with major players shifting to liquid cooling solutions.
Rising cloud provider capital expenditures and tightening global PUE regulations are making liquid cooling a standard for AI data centers.
The global liquid cooling market is forecast to reach $21.8 billion by 2027. Domestic suppliers with full supply chain capabilities are positioned to benefit from certification and domestic capacity expansion.
Key areas include cold plates, CDUs, and fluorinated fluids.
AI applications in chemicals are transforming the industry from molecular discovery to plant operations, significantly reducing R&D cycles and optimizing processes.
The core of this shift lies in vertical large models deeply integrated with chemical mechanisms and the data flywheel effect from high market share.
Growth Areas in Advanced Materials
In chemical new materials, green decarbonisation and recycling sectors are expected to enter a high-growth phase, driven by dual-carbon policies.
Sustainable Aviation Fuel is seen as a crucial pathway for emissions reduction in aviation, with global demand potentially exceeding 15 million tonnes by 2030.
In marine fuels, multiple paths like biofuels, green methanol, and bio-LNG are developing. In chemical fiber recycling, the rPET market is maturing with growing demand.
For lightweight materials, embodied AI and commercial space are creating new demand for high-performance, lightweight solutions.
This is expected to open new markets for materials like PEEK and high-performance carbon fiber.
For instance, demand from millions of robots could significantly boost PEEK consumption, while the growing commercial space sector is expected to drive demand for high-grade carbon fiber, with the Chinese market projected to reach substantial sizes by 2030 and 2035.
Advanced Manufacturing and Defense Focus
In high-end manufacturing and defense new materials, gas turbines and commercial space are seeing positive momentum, with a focus on new technologies like 3D printing.
Defense spending growth in 2026 is expected to support the sector, while competitive military exports and the scaling of domestic aircraft like the C919 may improve earnings for defense material suppliers.
Gas turbines are becoming a preferred power solution for AI data centers. With overseas leaders facing full order books and long lead times, domestic manufacturers and their supply chains may benefit from spillover demand and import substitution.
Areas to watch include superalloys, special materials, minor metals, and components.
Commercial space, now a national strategic industry, is seeing policy and technological advancements converge.
With satellite constellation deployments accelerating, upstream material demand is set to rise, particularly for high-strength copper alloys, tantalum/niobium, superalloys, titanium, and carbon fiber used in launch vehicles.
3D printing technology is maturing and expanding from aerospace and medical into consumer electronics, offering advantages in complex, lightweight structures with high material efficiency.
The global market is forecast for significant growth, with consumer electronics penetration currently low, indicating substantial room for expansion.
Companies with core technical barriers in equipment and those deeply embedded in top global supply chains are recommended for attention.
New Energy Material Developments
In new energy materials, development is progressing across multiple fronts. For solid-state batteries, national policy support is strengthening standard systems, with major players advancing pilot production lines.
The 2025-2026 period is seen as critical for technological breakthroughs, with global penetration potentially reaching significant levels by 2030.
Polymer and oxide semi-solid batteries are expected to industrialize first, with sulfide seen as the ultimate direction for all-solid-state batteries, favoring suppliers in the sulfide chain like high-purity lithium sulfide producers.
Controlled nuclear fusion has gained strategic national support, with numerous domestic projects planned for the coming years and substantial total investment expected.
The year 2026 is viewed as a potential turning point, with the industry transitioning from experimental to engineering reactors, which could reshape valuations across the nuclear power supply chain.
For nuclear power, materials represent a high-barrier, high-margin segment. Rising global electricity demand, partly driven by AI, is fostering a nuclear revival.
Domestic approvals for new reactors are expected to remain robust, with a peak in equipment delivery anticipated around 2026-2027. Fourth-generation technology, small modular reactors, and spent fuel reprocessing offer additional growth avenues.
Opportunities are seen in the overseas deployment of Hualong One technology and leading suppliers of core nuclear island materials.
In hydrogen energy, policy support is broadening to include industrial applications like green ammonia and steelmaking, alongside fuel cell vehicles.
Coupled with carbon reduction targets, this is expected to drive growth across the green hydrogen and fuel cell vehicle产业链.
Demand for solid oxide fuel cell systems is also rising, particularly for applications like data centers, promising a broad market for related core materials and equipment.
Potential Investment Risks
Key risk factors include potential delays or underwhelming results from policy implementation, slower-than-expected new product development and market adoption, intensifying competition across sectors, disruptive technological changes, weaker-than-anticipated downstream demand, lower-than-expected industry capital expenditure, and failure to achieve critical technological breakthroughs.
Comments