China AI Stocks See Earnings Surge Over 1,000-Fold, but Lofty Expectations Cap Rebound Potential
0xBroomberg
Multiple Chinese AI chip firms reported first-half profit growth above 1,000%, yet shares broadly fell on the news — the market had already priced in exponential gains, and valuations stretched from 28× to 36× forward earnings, squeezing room for further upside.
Profits surged over 1,000% — so why did the stocks drop?
Shannon Semiconductor (香农半导体) posted profit growth above 2,000%; its shares hit the 20% daily limit-down on the announcement. Shenzhen Taixin (泰芯半导体) guided up to 5,600% growth and also fell the 10% limit.
Memory-chip maker Shenzhen Longsys (江波龙) flagged profit growth exceeding 62,200%; shares rose 10% intraday, then gave back the entire gain.
This means → investors had already bought the "hyper-growth" story before the numbers landed — the actual release became a classic "sell the news" event.
Where do valuations stand now?
The CSI 300 Information Technology index rallied 80% in Q2, then began pulling back.
The index now trades at roughly 36× forward earnings, up from 28× in April.
In plain terms = the market is paying almost 30% more per dollar of expected profit than it did two months ago — the margin of safety for late buyers has thinned sharply.
Who can still keep growing?
CICC expects earnings momentum to persist for AI hardware, computing infrastructure, and upstream suppliers benefiting from price increases.
The next catalyst investors are watching: formal first-half results due by end of August — the market needs hard numbers to justify the current premium.
Vey-Sern Ling, managing director at Union Bancaire Privée, noted: "China AI stocks are driven more by positioning and expectations than by actual fundamentals and earnings."
Is weak consumption undermining the profit story?
Seres Group (赛力斯) expects a first-half loss on rising production costs; Muyuan Foods (牧原食品) was dragged by hog-price swings; China Vanke (万科) sees losses widening on thin project margins and asset write-downs.
This reflects a gap beneath AI's headline growth — consumer-facing recovery remains sluggish, and the earnings base across sectors is uneven.
William Bratton, head of Asia-Pacific cash-equity research at BNP Paribas, said: "Consumer earnings will eventually improve, but we think it is too early to position for that recovery now."
What is the biggest question mark for the second half?
A CICC team led by analyst Li Qiusuo warned that tech stocks face headwinds from overseas AI-sector volatility and shifting U.S. rate-hike expectations.
China's June reflation momentum slowed, signaling a still-fragile domestic price outlook.
This means → the core second-half question for AI stocks is not "can they keep earning?" but whether actual profit growth can catch up to what the market has already priced in — if it can't, valuations will have to adjust downward.
Content is for reference only, not financial advice.