Goldman Sachs has issued a research report maintaining its Buy rating on SMIC (00981), with a 12-month target price of HK$153 for its H-shares.

The investment bank is bullish on SMIC, expecting revenue in the third and fourth quarters of 2026 to remain at the elevated levels seen in the second quarter of 2026, driving second-half 2026 revenue to grow 12% quarter-on-quarter and 27% year-on-year.

This growth is primarily supported by China's generative AI development trend bolstering demand for mature process nodes and advanced nodes, the rising trend of domestic substitution, and the company's continued capacity expansion.

Goldman Sachs stated that under optimistic, base, and pessimistic scenarios, it estimates the total addressable market for China's AI chips will achieve compound annual growth rates of 142%, 69%, and 6% respectively from 2025 to 2030, reaching US$4,123 billion, US$678 billion, and US$66 billion respectively by 2030.

To realize the base-case scenario, SMIC would need to allocate 54% to 71% of its capital expenditure to 7-nanometer and more advanced process nodes.

The bank also forecasts that capital expenditure by China's leading cloud platforms will grow 80%, 20%, and 18% year-on-year respectively in 2026, 2027, and 2028, and has raised its forecasts for those same periods by 37%, 44%, and 55% respectively.