China Equity Strategy: How close are we to the peak of the AI tech upcycle in China?

UBS maintains a positive outlook on China's AI hardware tech sector for the remainder of 2026, driven by strong earnings, despite indicators that the cycle may be approaching a peak. The report highlights leaders in sub-sectors like optical modules, GPUs, and power equipment as preferred investments.

Key Takeaways

• 1.We remain positive on China's AI tech hardware names for the rest of the year due to strong earnings momentum.
• 2.Signs of an approaching peak in the AI tech cycle include high mutual fund positions, stretched valuations, and rising capex.

Table of Contents

• How close are we to the peak of the AI tech upcycle in China?
• A comprehensive overview of China's AI supply chain
• How do Chinese players' fundamentals and valuation compare with global peers?
• How have the AI tech stocks in China traded?
• Equity Strategy
• Our Thesis In Pictures
• AI hardware tech consensus capex growth
• Forward P/E of China vs global AI names
• Can the AI boom sustain?
• An overview of China's AI supply chain
• Energy infrastructure/ power equipment
• Cooling / thermal control systems
• Multi-layer ceramic capacitor (or MLCCs)
• Power semis
• The EDA and IP layer provides
• Semiconductor equipment
• The foundry layer
• High-bandwidth memory (HBM)
• Advanced packaging technologies
• Copper Clad Laminate ("CCL"), fiber glass and other upstream materials
• Substrates, printed circuit boards (PCBs), and connectors
• AI chips
• Optical networking
• Servers and OEMs
• Data centers
• Cloud providers & hyperscalers
• LLM models
• Software and applications
• Comparing the hyperscaler and LLM customers
• Sector leaders preferred within China AI tech supply chain
• Appendix 1: Historically what has driven the AI tech hardware share price?
• Appendix 2: Views from UBS Global Equity strategy team on AI
• Appendix 3: China & US AI tech hardware names
• Valuation Method and Risk Statement
• Required Disclosures

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