ChiNext surges 5% as China chip stocks rally on AI policy boost

China's ChiNext Index surged 5.2% and the STAR 50 jumped nearly 7% in a dramatic reversal, as semiconductor stocks exploded higher on a triple catalyst of Shanghai AI policy, MIIT's manufacturing initiative, and Huawei technology breakthroughs.

China's ChiNext Index surged 5.2% on Tuesday, while the STAR 50 jumped nearly 7%, as semiconductor stocks rallied on AI policy catalysts and technology breakthroughs.

"Optical module leaders' first-half earnings exceeded expectations, confirming the high prosperity of the AI supply chain," said Li Lifeng, an analyst at Huaxi Securities.

Semiconductor equipment makers led the charge, with Northern Huachuang, Zhenbao Technology, and Jinhai Tong all hitting the daily 10% limit-up. Changchuan Technology, Jingzhida, Tuojing Technology, and Zhongwei Company each surged more than 12%. Memory chip stocks also rebounded strongly, with Pucun Micro rising nearly 10%. Trading volume reached 2.01 trillion yuan in the morning session alone, 330 billion yuan above the prior session's half-day turnover.

The rally marks a sharp reversal from early losses, when the STAR 50 was down more than 3% before flipping to a near-7% gain — a swing of roughly 10 percentage points. The move shows how sensitive China's tech-heavy indices have become to policy signals, as Beijing doubles down on domestic AI infrastructure. Zhipu, a Chinese AI model developer, surged more than 25% after completing its acquisition of XCore Sigma, a domestic AI heterogeneous computing software firm, and disclosed plans for a 1GW-scale domestic AI computing data center using entirely Chinese-made chips.

Sector Rotation and Cross-Asset Moves

The gains in A-shares spilled over to Hong Kong, where the Hang Seng Tech Index rose 1.83%. Zhipu's 25% surge led the AI model sector higher, while Hua Hong Semiconductor jumped 16%. The Hang Seng Index was little changed, up 0.03%. The offshore yuan traded at 7.24 per dollar, strengthening 0.1% as risk appetite improved.

The semiconductor rally was fueled by three distinct catalysts. Shanghai released a policy blueprint to accelerate the development of an AI innovation highland. The Ministry of Industry and Information Technology pledged to deepen its "AI+Manufacturing" initiative. And Huawei showcased technology breakthroughs at the World Artificial Intelligence Conference, providing a third tailwind for the chip supply chain.

The strength in tech contrasted with weakness in other sectors. Oil and gas stocks declined, with Keli falling more than 10%. Pharmaceutical and healthcare names also slid, with Meinuo hitting the daily limit-down. Power stocks weakened, with Hunan Development and Hangzhou Thermal Power both hitting limit-down.

In the bond market, Chinese government bond futures edged higher, with the 30-year contract adding 0.12% and the 10-year rising 0.02%. Commodities were mixed: silver futures jumped 3.27%, while lithium carbonate slumped more than 4% and low-sulfur fuel oil fell 3.24%.

Macro Backdrop and Industry Context

The rally comes as China's export machine continues to hum. June exports surged 27% from a year earlier, driven partly by AI-related demand for semiconductors and electronic components, according to customs data. Trade in electronic components, computer spare parts, and computing hardware jumped nearly 57% to 5.1 trillion yuan ($760 billion) in the first half of the year.

The broader context for the chip sector also includes CXMT's planned $8.6 billion IPO, which would be Asia's largest this year, signaling strong capital market appetite for domestic memory chip makers as China pushes for semiconductor self-sufficiency. The stock surge on Tuesday adds momentum to a sector that has become a central pillar of Beijing's industrial policy, with the government directing massive capital toward domestic chip production and AI infrastructure buildout.

This article is for informational purposes only and does not constitute investment advice.