An AI Powerhouse Emerges
On August 27, 2025, China’s stock market witnessed a historic moment. Cambricon, a domestic AI chipmaker, saw its stock price skyrocket by nearly 10% during intraday trading, briefly surpassing liquor giant Kweichow Moutai to become the A-share market’s highest-valued company. Although it retraced slightly by the close, Cambricon’s monthly gains exceeded 100%, and its cumulative growth since 2023 surpassed an astonishing 2,500%, pushing its market capitalization past 600 billion yuan at its peak.
This surge wasn’t isolated. It fueled rallies across semiconductor, optical module, communication equipment, and internet sectors. As the largest constituent (over 10% weighting) of the STAR AI ETF (588730), Cambricon’s rise propelled the fund up 3.03% for the day and over 61% since April 8. Similarly, the broader AI ETF (159819) climbed 1.99%, gaining more than 68% since April 9.
Despite extended rallies and substantial gains, momentum remains strong. Bullish sentiment is intensifying, driven by waves of positive news, policy support, robust earnings, and capital inflows.
Policy Catalysts and Explosive Earnings
The most significant policy boost came from the State Council’s official release of the ‘Opinions on Deepening the Implementation of the AI+ Initiative.’ This document targets extensive AI integration across six key sectors by 2027, with next-gen smart terminals and AI agents achieving over 70% adoption. By 2030, adoption should exceed 90%, establishing an intelligent economy as a critical growth driver. By 2035, China aims to fully enter a new phase of intelligent economic and societal development, bolstering its modernization goals.
Approved during a State Council executive meeting on July 31, 2025, this policy marks the start of a powerful, government-driven phase for China’s AI industry, injecting strong momentum into development and investment.
Blockbuster Financial Results
Simultaneously, two AI leaders—Cambricon and InnoLight Technology—released stellar half-year reports. Cambricon’s revenue hit 2.881 billion yuan, up 4,347.82% year-over-year, with net profit reaching 1.038 billion yuan versus a 530 million yuan loss a year earlier. InnoLight reported revenue of 14.789 billion yuan, up 36.95%, and net profit attributable to shareholders of 3.995 billion yuan, a 69.40% increase.
Cambricon’s 43-fold revenue explosion validates its stock surge, reflecting years of R&D culminating in soaring demand for domestic alternatives. Its latest Siyuan series chips now rival international products in certain specs, offering cost and localization advantages.
ETF Inflows Fueling Growth
Beyond fundamentals, Cambricon’s rally is underpinned by capital inflows, particularly from index-tracking ETFs. Its mid-year report revealed ETFs holding four of its top ten tradable shareholder spots. ETF assets have swelled to 5 trillion yuan, with the latest trillion added in just five months—a record pace.
Recent data shows 294 million yuan net流入 into STAR AI ETF (588730) and 1.217 billion yuan into AI ETF (159819), highlighting strong investor appetite for AI exposure through diversified, low-cost instruments.
Industry-Wide Performance Validation
Cambricon and InnoLight, alongside firms like Sunoptics and TFC Optical, are delivering tangible results that affirm AI’s rapid growth narrative. Orders stem from real smart-computing center builds and procurement by tech giants, proving products are deployed in actual workloads—not just visionary promises.
Cambricon’s growth stems from technological maturation meeting爆发 demand for domestic substitution. Similarly, the ‘Yi-Zhong-Tian’ CPO triumvirate (Sunoptics, InnoLight, TFC) reflects China’s advantages in technology, manufacturing, cost, and client relationships.
Global Client Endorsement
These suppliers serve stringent global clients like NVIDIA, Google, Meta, Amazon, Huawei, Baidu, Alibaba, and Tencent. Long-term orders from such firms signal indispensable, verified demand rooted in worldwide AI infrastructure expansion.
The AI arms race is driving data center expansions and large-model training globally, fueling need for GPUs, high-speed optical modules (800G/1.6T), and components like liquid cooling systems. This has created order backlogs for Cambricon, Sunoptics, InnoLight, Foxconn Industrial Internet, and Inspur.
Sector-focused indices and ETFs, like STAR AI ETF (588730) (20% daily limit, high elasticity) and AI ETF (159819) (20.829 billion yuan AUM, lowest fees at 0.15% management/0.05% custody), offer investors efficient tools to capitalize on this trend.
Valuation Concerns: Bubble or Rational exuberance?
With soaring valuations, questions about a potential bubble are inevitable. Yet, historical parallels like the 2000 Nasdaq crash require context. That bubble featured ‘PPT companies’ with zero revenue/profits and vague monetization, whereas today’s AI leaders have solid financials and clear business models.
Modern capital prioritizes firms with robust profitability, like FAANNG stocks with 20-30% net margins. In AI, heavy investment concentrates on tech giants with reasonable valuations—M7 stocks trade at 20-30x P/E, some around 50x.
Growth Justifying Multiples
Valuation isn’t just about absolute P/E; it’s growth-adjusted. A 100x P/E firm could see its multiple halve to 50x if profits double in a year, and drop to 25x if they double again. For high-growth AI firms, this isn’t improbable.
Unlike 2000’s groundless hype, today’s AI ecosystem rests on hardware, algorithmic breakthroughs, and real-world applications. While somewhat overvalued, profits provide a safety cushion, reducing risk versus the dot-com era.
Seizing the AI Investment opportunity
We stand at the dawn of an AI revolution, a golden investment era. Upstream hardware vendors like NVIDIA, TSMC, Cambricon, InnoLight, and Sunoptics—the ‘shovel sellers’—thrive regardless of which downstream ‘gold digger’ succeeds, enjoying explosive revenue and profit growth.
Cloud giants like Microsoft, Amazon, Google, Alibaba, and Tencent profit from MaaS and AI compute leasing, making AI a core growth engine. Even downstream apps in healthcare, office tools, and humanoid robots near commercialization, with clear monetization paths.
Every 10-20 years, technological shifts create immense value. AI is today’s frontier—a opportunity no investor should miss. Dive into AI ETFs, research leaders with solid fundamentals, and consider long-term holds to ride this wave.
– Research emerging AI infrastructure plays beyond headlines.
– Monitor policy developments for further catalysts.
– Diversify through sector ETFs to mitigate single-stock risk.
– Focus on companies with verified orders and profit trajectories.
– Prepare for volatility but stay aligned with macro trends.