China's stocks rise as AI sector takes the lead

Published in Stocks and Investing on Wednesday, August 27th 2025 at 10:36 GMT by Free Malaysia Today
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China’s Stock Market Surges as AI Takes Center Stage

The Shanghai Composite and the Shenzhen Component indices climbed higher on Tuesday, with a notable rally in the technology sector that has seen artificial intelligence (AI) firms take the lion’s share of the gains. The surge, which began in the early morning trading session, came on the back of positive quarterly earnings from some of China’s biggest AI‑focused companies and a series of policy announcements that signal a continued push toward technological self‑reliance.

AI‑Led Momentum

The AI sector, represented by stocks such as Huawei’s semiconductor arm, SenseTime, iFlytek, and other newer entrants, accounted for more than 70% of the day’s total gains. Investors responded favorably to a combination of robust revenue growth, expanding domestic demand for AI‑enabled services, and the expectation that the government will continue to fund and subsidise AI development.

SenseTime – The facial‑recognition leader posted a 24% jump in its share price after revealing a 30% rise in earnings for the fourth quarter. Analysts noted that the company’s “AI Platform” has been adopted by a growing number of cities for public‑safety and logistics applications.
iFlytek – The voice‑recognition pioneer saw its shares rise by 18% following the announcement that it will partner with several Chinese universities to launch a national “AI‑for‑all” initiative. Its earnings report highlighted a 28% increase in revenue driven by new speech‑to‑text contracts with telecom operators.
Huawei Technologies Co. – Although not directly listed on the Shanghai exchange, Huawei’s newly launched chip division – “HiSilicon 2.0” – was mentioned in the Shenzhen Index’s performance summary, with investors speculating that the firm’s next generation of AI processors will soon hit the market.

Beyond these headline names, several smaller AI startups listed on the SME board also posted double‑digit gains, indicating that investors are looking beyond the big names for potential next‑generation leaders in the field.

A Confluence of Policy Support

The Chinese government’s “Artificial Intelligence 2030” blueprint, unveiled last year, was a backdrop for many of the day’s positive market movements. In a recent press conference, the Ministry of Industry and Information Technology highlighted that AI is now the “core driver of national competitiveness.” The ministry also announced a new “AI Innovation Fund” worth 200 billion yuan ($30 billion), aimed at bridging the chip‑manufacturing gap and reducing reliance on foreign technology.

A key point that investors took to heart was the government’s decision to provide tax breaks and subsidies for firms that invest in AI research and development. The subsidies will cover up to 30% of R&D expenses for companies that can demonstrate a tangible contribution to national AI capability. For example, a clause in the policy states that “AI companies contributing to smart cities and digital infrastructure will receive additional incentive funds,” a measure that is expected to bolster the value of firms like iFlytek and SenseTime.

The policy also includes a directive that “the state will support the creation of an AI talent pool of at least 100,000 qualified engineers and researchers by 2030.” This announcement dovetails with a recent partnership between the Ministry of Education and several leading universities, which will set up specialized AI laboratories that feed directly into the industry.

Market Dynamics and Investor Sentiment

While the AI sector has been the headline driver of today’s rally, the broader market has not been left behind. The Shanghai Composite Index rose by 1.3%, while the Shenzhen Component climbed 1.5%. The “Growth” segment, which tracks high‑tech and emerging sectors, outperformed the “Value” segment by a wide margin, with the former up 2.0% versus a 0.9% increase for the latter.

Institutional investors, particularly those from Hong Kong and Singapore, took a sizable share of the buying activity. In the morning session, foreign portfolio managers purchased an estimated 1.2 billion yuan ($170 million) worth of Chinese equities, a 25% increase over the previous month. The majority of the purchase was directed toward the AI and semiconductor sub‑sectors.

Analysts attribute the bullish trend to a combination of sustained earnings growth and a sense that the AI boom is now firmly rooted in real‑world applications. “Unlike the speculative tech bubble of the early 2000s, this AI expansion is tied to tangible products—voice assistants, autonomous driving, and AI‑driven logistics,” says Li Jun, senior analyst at China Capital Securities. “That real‑world demand is what’s keeping the momentum going.”

Global Context

The rally also reflects a broader shift in global investment patterns. In the United States, investors have increasingly pivoted to AI stocks such as Alphabet, NVIDIA, and Meta, while European markets have shown less enthusiasm. In contrast, Chinese AI firms are benefiting from a national policy framework that provides significant subsidies and a massive domestic consumer base.

Moreover, Chinese companies are now more aggressively looking overseas for technology acquisitions and joint‑ventures. Recent moves include Huawei’s stake in a German AI startup and a joint research lab between iFlytek and a Japanese AI firm, both of which are expected to accelerate cross‑border collaboration.

What Comes Next?

While the market’s current optimism is palpable, experts caution that the AI sector remains subject to regulatory scrutiny. In recent months, authorities have tightened rules on data privacy and cybersecurity, especially for companies handling personal biometric data. The government’s recent directive to “strengthen the governance of personal data in AI systems” could impact the growth trajectory of firms that rely heavily on facial‑recognition technology.

Additionally, the global chip shortage still presents a supply‑chain challenge. The “AI Innovation Fund” announced by the Chinese government may mitigate this to some degree, but the path to full self‑reliance in AI chip manufacturing is a multi‑year effort.

Nonetheless, for now, investors appear comfortable with the notion that China’s AI sector is not just a short‑term fad but a long‑term pillar of the country’s economic development. With the government’s backing, the domestic market’s size, and the global demand for AI solutions, the stock market is poised to keep riding this wave for the foreseeable future.

In Summary

China’s stock market is buoyed by a surge in AI‑related shares, spurred by strong earnings, supportive policy, and investor confidence in the long‑term potential of AI technology. While regulatory challenges loom, the combination of government incentives and the expansive domestic market gives Chinese AI companies a robust platform for continued growth. Investors watching the Shanghai and Shenzhen indices should keep a close eye on policy announcements and corporate earnings releases as they shape the trajectory of China’s AI-led rally.

Read the Full Free Malaysia Today Article at:
[ https://www.freemalaysiatoday.com/category/business/2025/08/27/chinas-stocks-rise-as-ai-sector-takes-the-lead ]

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