Shares in the domestic AI supply chain rallied sharply in afternoon trading on August 31, after state media reported a severe supply-demand imbalance in the country's computing power sector. Star Ring Technology led the advance with a gain of more than 11 percent, while Opt Automation rose over 10 percent. Amlogic and Espressif Systems both climbed more than 8 percent, with Verisilicon and Cambricon Technologies also posting significant gains among a broad rally in the sector.

The Huabao STAR AI ETF (589520), which tracks an index with 42 percent GPU exposure, surged 3.72 percent to close at its intraday high.

Supply gap tenfold

According to a report from CCTV Finance, industry experts say domestic computing capacity demand is running more than ten times higher than available supply. Domestic AI chip makers have seen orders surge to the point where standard delivery times have been pushed back by a year, with some high-end computing firms now scheduling deliveries three years out. As local data center projects receive concentrated government approvals, the industry is shifting from product validation to batch delivery.

First-half 2026 earnings reports underscore the sector's momentum. Biren Technology posted nearly a twentyfold surge in revenue year over year, while major players including Cambricon and Moore Threads all reported strong revenue growth. Industry research suggests that in 2026, demand for domestic AI chips will reach approximately four million units against actual delivery of around three million, leaving a shortfall in the millions. Market participants widely believe domestic chips are in a powerful upcycle for high-end AI applications.

Three-stage progression

The domestic GPU industry has completed its evolution through three critical phases: in 2023, "able to build," when chips were designed and successfully taped out to run large models; then "able to sell," as products gained certification from major internet companies and entered procurement lists, driving revenue growth; and now "able to profit," as gross margins turned positive, net profits excluding non-recurring items moved into the black, and losses narrowed sharply or converted to profitability.

Analyst outlook

Guosheng Securities notes that leading chip design companies have already entered their profit phase. As domestic chip capabilities continue to improve and narrow the performance gap with overseas rivals, internet firms and data centers are accelerating their adoption of domestic chips. Computing demand is shifting rapidly toward domestic suppliers, and expanding application scenarios combined with accumulated experience are fueling further chip iterations, creating a positive R&D cycle.

CICC points out that computing power has been elevated to the level of national infrastructure. With domestic large models iterating continuously, "super nodes" are shifting the competitive landscape from individual chip performance toward system-level efficiency. Domestic chips have now proven their ability to handle real large-model traffic loads, meaning increased model usage will translate directly into higher utilization and procurement demand for domestic chips, further improving order visibility across the domestic AI chip supply chain.

Investment vehicle focus

The Huabao STAR AI ETF (589520), together with its feeder funds (Class A: 024560, Class C: 024561), offers targeted exposure to the domestic AI replacement theme. The fund tracks 30 relatively large STAR Market companies providing foundational resources, technology, and application support for AI. The semiconductor industry accounts for approximately 70.4 percent of the portfolio's weighting, with GPU-related stocks and AI application stocks at 41.98 percent and 23.19 percent respectively. The ETF features a 20 percent daily price fluctuation limit and provides low-cost access to the STAR Market's breakthrough potential. The fund also qualifies as a margin trading target, serving as an efficient tool for gaining exposure to domestic computing power in a single transaction.

Risk disclosure: The Huabao STAR AI ETF passively tracks the STAR AI Index, which has a base date of December 30, 2022, and was published on July 25, 2024. Index constituent composition adjusts according to index rules, and historical backtesting does not guarantee future index performance. Any stocks or index constituents mentioned are for illustration only and do not constitute investment advice or reflect fund holdings. The fund manager classifies this ETF as R4 risk level, suitable for investors rated C4 or above. All information provided is for reference only. Investors are solely responsible for their own investment decisions. Investment in funds carries risk, and past performance is not indicative of future returns.