Fresh analysis from VanEck has shed light on the "AI Euphoria" sweeping the US.
But there might be another market set to benefit long term.
Alice Shen, Portfolio Manager at VanEck said in a recent report that Nvidia Inc (NASDAQ: NVDA) posted gravity-defying earnings in its most recent October quarter.
This came as the AI economy increasingly looped back on itself and the major players invested in each other's technologies.
Ms Shen said giants like OpenAI and Oracle Corp (NYSE: ORCL) are locking in the chip supply needed to scale their models. This means demand for Nvidia hardware could soar even more.
How does China fit into the AI puzzle?
AI euphoria isn't limited to the US.
The Chinese market has also been focussed on homegrown AI technology and chipmaking.
Subsequently, valuations for pure-play AI stocks have soared.
While China is a global leader in semiconductor production, it isn't limiting its AI participation to this segment.
Ms Shen believes China may be taking a different, more holistic approach compared to the western world.
The tremendous amounts of electricity, cooling, metal-intensive data centres, and resilient power supply required by AI have been the focus of many Chinese companies that have been specialising in these systems for decades.
For investors, this means there could be more reasonably priced opportunities across the broader supply chain that powers the physical backbone of AI: metals producers, energy storage leaders, and optical fibre manufacturers.
The AI boom isn't just digital
When you think of AI, the first thing that comes to mind might be cloud computing, Chat AI tools, etc.
But the truth is, the data centres fuelling these AI solutions require huge amounts of copper and aluminium in servers and heatsinks.
Data indicates global copper demand could surge as much as 24% by 2035, with data centre expansion being one of the key drivers.
According to VanEck, China may have an advantage is its integrated value chain across mining, refining and manufacturing.
Several Chinese copper and aluminium miners have been outperforming the CSI 300 Materials Index this year. In our view, investing in these metals may offer a more cost-effective and direct way to participate in China's AI capex cycle.
Chinese companies engaged in battery manufacturing and Graphics Processing Units (GPUs) have also been soaring this year as a result of the Chinese AI boom.
How do investors gain exposure?
For investors here in Australia, the most important question is how to gain exposure to this market.
There are a few ASX ETFs directly targeting Chinese technology and AI:
- VanEck China New Economy ETF (ASX: CNEW) – Invests in 120 fundamentally sound and attractively valued companies with growth prospects in China's New Economy, targeting technology, healthcare, and consumer staples and consumer discretionary sectors.
- VanEck Ftse China A50 ETF (ASX: CETF) – Invests in a diversified portfolio comprising the 50 largest companies in the mainland (A-shares) Chinese market.
- Global X China Tech Etf (ASX: DRGN) – designed to track the performance of 20 leading technology companies listed in Mainland China and Hong Kong. The index selects across 15 innovation-linked sectors, including semiconductors, automation, industrial software, and internet platforms.
