Daqo New Energy (DQ) stock surged 7.64% in pre-market trading on Tuesday, outpacing earlier estimates and leading a broader rally in Chinese solar stocks. The significant uptick comes amidst swirling rumors of potential production cuts in the polysilicon industry and speculation about industry consolidation, which could potentially alleviate overcapacity issues and stabilize prices.

According to reports from China's state-run Securities Times, market rumors suggest that a top polysilicon producer has proposed production cuts to support prices. Additionally, there is speculation that China's top six polysilicon producers might acquire all remaining production capacity and set a target price range for the material. These potential measures have sparked optimism among investors, particularly benefiting major polysilicon producers like Daqo New Energy.

The solar industry, especially the polysilicon sector, has been grappling with overcapacity and plummeting prices, leading to significant financial challenges for companies. Daqo New Energy, for instance, reported a substantial loss of $71.84 million in the first quarter. If the rumored production cuts and industry consolidation materialize, they could provide much-needed support for polysilicon prices and potentially improve the financial outlook for companies in the sector. This prospect has driven investor interest and contributed to the sharp rise in Daqo New Energy's stock price, reflecting growing optimism about the company's future prospects in a potentially stabilizing market.