SMIC Soars on AI Boom and China's Chip Localization Push
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Shares of Semiconductor Manufacturing International Corp. (SMIC), China's leading chipmaker, surged on Monday amid growing investor enthusiasm for China's AI development and the country's accelerated efforts to build its own semiconductor industry, as reported by the Wall Street Journal.
SMIC's Shanghai-listed shares climbed as much as 5.2% before settling around 2.7% higher, extending Friday's 10% gains. Its Hong Kong-listed shares also saw a significant increase, rising 3.7% on Monday, bringing the total gains to over 16% in just four trading sessions.
The surge in SMIC's stock price is attributed to the confluence of two major trends: the rapid advancement of AI in China and the increasing focus on domestic chip production.
Chinese tech giants and startups are aggressively investing in AI, aiming to develop models that are cheaper, faster, and more specialized. Analysts believe this increased investment will significantly benefit the entire computing hardware supply chain, including chip companies like SMIC.
Recent developments in AI technology highlight this trend. ByteDance, TikTok's parent company, unveiled a new visual recognition large language model capable of interpreting visual content. The company also announced an updated version of its most advanced language model, Doubao Pro, which it claims is comparable to GPT-4 in capabilities but significantly more affordable.
Tan Dai, president of ByteDance's Volcano Engine cloud unit, revealed that the average daily token use of the Doubao model has increased 33-fold since May, underscoring the rapid adoption of this technology.
Analysts suggest that the visual recognition model has the potential to drive innovation in consumer-focused AI applications and products, potentially leading to the development of AI glasses and other similar devices.
Meanwhile, the US government's imposition of new AI chip restrictions on China is accelerating the country's efforts to achieve semiconductor independence. As China's largest foundry with the most advanced fabrication technology within the country, SMIC is well-positioned to capitalize on this localization trend, according to DBS.
However, Daiwa analyst Rick Hsu expressed some caution, questioning the extent to which order reallocation will directly benefit SMIC's business. This is because SMIC primarily focuses on mature chip nodes rather than the cutting-edge chips typically used in AI applications.