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Take a look at the key players of China's domestic AI scene: Incremental policies are anticipated to boost the performance of Chinese assets into 2025.
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1. Market recap
Last Friday, US stocks rally continued, with the $.SPX(.SPX)$ and $.IXIC(.IXIC)$ reaching new closing highs. $Tesla Motors(TSLA)$ surged over 5%. Most popular Chinese stocks rose, with thep $NASDAQ Golden Dragon China Index(HXC)$ rose 0.98%.
Macro Overview: In November, the US added 227,000 non-farm jobs, and the unemployment rate was 4.2%, both exceeding expectations. Wall Street now estimates the probability of a Fed rate cut in December has risen from less than 70% before the report to 85%.
No Surprises: $Bitcoin(BTC.USD.CC)$ climbed back above $100,000, boosting cryptocurrency stocks. $Canaan Inc.(CAN)$ . soared over 35%, and $Bit Digital, Inc.(BTBT)$ rose more than 9%.
Upcoming Events: This Friday (December 13), the $NASDAQ 100(NDX)$ will announce its annual component adjustments. Popular stocks like $Palantir Technologies Inc.(PLTR)$ , $MicroStrategy(MSTR)$ , and $Coinbase Global, Inc.(COIN)$ are expected to be included, potentially driving significant gains due to passive buying by index funds and ETFs.
2. New Year Rally (in the making)
On December 9, the Politburo of the Central Committee of the Communist Party of China announces the implementation of a "moderately accommodative" monetary policy starting in 2025. This marks the first shift in China's monetary policy stance since 2011. The meeting also emphasized the importance of vigorously boosting consumption, improving investment efficiency, and comprehensively expanding domestic demand.
After the A-share market closed, Chinese assets surged rapidly. By 4:00 PM, the $China A50 Index - main 2412(CNmain)$ futures had increased by 4%, the $HSTECH(HSTECH)$ rose by over 4%, and the 3x leveraged FTSE China ETF in the night session jumped by more than 13%.Today, China's A-share market showed a volatile trend, with the $SSE Comp(000001.SH)$ slightly down by 0.05%, closing at 3,402.53 points.
Last week, the Shanghai Composite Index regained 3,400 points, hitting a one-month high. The weekly trading volume expanded to 8.62 trillion yuan, an increase of over 1 trillion yuan from the previous week. Market views include: 1. Potential new policy support from important year-end meetings. 2. Expectations of increased economic stimulus. Significant macroeconomic easing policies, including monetary easing, are needed to address domestic demand and US pressure, reckon Wall Street banks.
China's AI Playbook
$Cambricon Technologies Corporation Limited(688256)$
In the first three quarters of 2024, Cambricon Technologies reported a revenue of 185 million yuan, marking a 27.09% year-on-year increase. The net loss was 724 million yuan, though the loss has narrowed compared to the previous year. Notably, in the third quarter alone, revenue surged to 121 million yuan, a significant year-on-year increase of 284.59%.
As a leading Chinese AI chip company, Cambricon is the second highest-priced stock in the A-share market, following Kweichow Moutai (600519). Its inclusion in the SSE 50 Index is expected to attract at least 3.5 billion yuan in incremental funds.
Outlook: The fourth quarter is typically a period of deliveries and performance releases, with expected revenue growth and positive performance guidance. As a leading domestic AI chip company, Cambricon is a key player in the current wave of AI innovation.
$Arcsoft Corporation Limited(688088)$
In the first three quarters of 2024, revenue was 2.571 billion yuan, up 68.56% year-on-year; net profit was 978 million yuan, up 318.42% year-on-year.
As a global leader in memory interface chips with a 45% market share, the Company also has a certain influence in the AI computing power field. It competes with ALAB (Astera Labs, a US AI infrastructure unicorn) in PCIe Retimer chips and CXL controllers.
Outlook: With the ramp-up of NVIDIA's GB200, the demand for AI capacity chips will further increase. The company's PCIe retimer, MCD, and MDB products are expected to enter a rapid growth phase.
$Luxshare Precision Industry Co.,Ltd.(002475)$
In the first three quarters of 2024, its revenue was 177.177 billion yuan, up 13.67% year-on-year; net profit was 9.075 billion yuan, up 23.06% year-on-year.
As a core supplier for iPhone and more high-end models, the company also mentioned incremental opportunities in serving "Korean mobile phone brands" in its October research notes.
Outlook: As a supplier for Nvidia's revolutionary Blackwell G200 product, mainly providing copper cables and backplane connectors, and optical module products, the Company has seen the number of small and medium-sized data centers it serves domestically and internationally quadruple this year.
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