While many investors on Wall Street are shying away from Chinese stocks, fearing capital losses and unwanted risks, analysts are recommending that market participants take a closer look at local chipmakers.
According to experts, they have a number of advantages. This viewpoint is endorsed by analysts at Barclays and Sanford C. Bernstein. Their currency strategists believe that chip companies such as Naura Technology Group Co. and Hygon Information Technology Co. could become as popular as their American counterparts, Applied Materials Inc. and Advanced Micro Devices Inc.
The analysts attribute this rosy outlook to the investment opportunities that China’s semiconductor industry offers to market players. “As more resources are invested in this industry, some home-grown companies will thrive,” they predict.
The confrontation between China and the United States could also contribute to the development of chip production in this Asian country. The US is making every effort to foreclose China's ability to obtain advanced American semiconductors and related technologies. According to experts, this could cause the opposite effect, with the domestic chip market in China flourishing.
Nevertheless, investors remain cautious about China’s equities. This uncertainty comes from a protracted stock market slump that has wiped out $6.5 trillion in value since February 2021 amid serious concerns over the country’s tepid economic growth and rising geopolitical tensions. The United States and its allies stepping up export restrictions on high-end artificial intelligence chips are adding fuel to the fire. Notably, the US prohibited the sale of chip manufacturing equipment to China, including to such giants as Huawei Technologies Co. and Semiconductor Manufacturing International Corp.
However, the response from the Chinese authorities was pretty peaceful and wise. The government supported domestic chip suppliers, allocating more than $100 billion to reduce their dependence on the West.
