While the competition in artificial intelligence mainly centers around advanced semiconductors, many publicly listed companies in mainland China are crucial in producing components essential for data centers. According to a report by Michael Herson and Howes Song from 22V Research, nearly 30% of the United States’ imports of AI-related products come from Chinese firms. They noted that even though China may not have the capacity to produce cutting-edge chips at a large scale, it significantly contributes to vital areas of the data center supply chain, including energy storage, transformers, as well as critical minerals and chemicals. This less flashy aspect is something investors should consider more seriously.
The report highlighted that AI-related exports contributed to about half of China’s overall export growth this year, with many companies based in Shenzhen. These hardware companies have fueled strong growth for Chinese stocks recently. In fact, the ChiNext index, which tracks Shenzhen-listed firms, has doubled over the last year. The analysis covered stocks in the CSI 300 index, representing the largest companies in Shenzhen and Shanghai. It revealed that among the top 10 companies involved in the AI supply chain by market value, nine—excluding the battery firm CATL—saw their growth at least double within the year leading up to May.
This group includes suppliers like Victory Giant, which caters to Nvidia, and Shenzhen-based printed circuit board companies like Dongshan Precision and Shengyi Technology. Additionally, Sanhuan Group, which also trades in Shenzhen, manufactures multilayer ceramic capacitors (MLCCs). These components are essential for energy storage and release in chips; reports indicate that Nvidia has nearly tripled the MLCCs used in its latest Vera Rubin AI system.
On the server front, Foxconn Industrial Internet, a branch of Apple’s iPhone supply chain, was recognized in the 22V top 10 alongside energy firm Sungrow Power. Foxconn stated that cloud computing is expected to surge by 88.7% to approximately 602.68 billion yuan ($88.67 billion) by 2025, becoming the leading growth driver.
The list featured optical and networking companies such as InnoLight, Eoptolink, and TFC, which utilize optical technology to enable semiconductors to process signals at near-light speeds. Analysts from JPMorgan noted the importance of fiber optic components in a report discussing China’s advantages in AI and data center connectivity. They mentioned that AI data centers demand high-density, high-speed connections, using 5 to 10 times more fiber than traditional server rooms. With order books extending as far as 2027-2028, data from China Customs reveals that the export value of fiber and cables has surged to four times its previous value, averaging a price increase of about three times.
Although Chinese tech companies generally still trade at lower valuations compared to their U.S. counterparts, interest from local investors appears to be rising. Recent stock rallies have propelled InnoLight, Foxconn Industrial Internet, and CATL’s market capitalizations into the neighborhood of 1 trillion yuan.
