Chinese server and chipmakers are entering a ‘super cycle’ as local governments pour money into AI-related computing infrastructure.

The AI Computing Power Concept Index, compiled by Wind and tracking 54 related stocks, reached a record high on August 25, 2025, up 166% over the past 52 weeks.

DeepSeek, a Chinese AI startup, hinted last week that it changed its data format to support domestic AI chips, fueling further enthusiasm among investors.

At the China Computing Power Conference, officials said the country will boost its AI computing capacity by 40% this year.

Much of this growth is expected to benefit local hardware suppliers, as Beijing continues to promote tech self-sufficiency.

Cambricon Technologies, a Chinese AI chip company, has seen its share price rise 460% over the past year, amid expectations it could offer an alternative to US AI chipmaker Nvidia.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s massive government spending creates infrastructure investment supercycle

China’s current AI chip boom follows a familiar pattern of state-driven infrastructure investment that historically creates significant market opportunities for domestic suppliers.

The government’s commitment to boost AI computing capacity by 40% this year represents the latest phase of a strategy that began in 2017, when China announced plans to build a $150 billion national AI industry by 20301.

Local governments are now the primary drivers of this spending spree, with cities and provinces competing to build AI computing infrastructure, similar to how they previously raced to build high-speed rail networks and 5G infrastructure.

This approach has consistently created favorable scenarios for Chinese companies that can secure government contracts at scale.

The AI Computing Power Concept Index’s 166% surge over 52 weeks reflects investor recognition that government infrastructure spending typically flows to domestic suppliers, especially when national security concerns are involved.

2️⃣ US export controls accelerate China’s domestic chip development timeline

The current surge in Chinese AI chip stocks demonstrates how trade restrictions can drive stronger incentives for domestic alternatives.