Artificial intelligence (AI) companies in China are expected to record a very high profit surge in the first half of this year.
In fact, several companies in the chip supply chain reported initial profits of more than 1,000%, while others recorded growth of tens of thousands of percent.
However, this extraordinary performance has not yet managed to revive the rise in AI stocks in the country.
This is because most investors had expected strong financial results in advance.
During the second quarter of this year, the CSI 300 technology index, which tracks semiconductor and electronic component companies in China, jumped by about 80%.
Such a rapid increase has made stock prices more expensive, thus raising investors' expectations for the company's performance. As a result, despite the announced profits being very high, the market reaction was not very encouraging.
For example, Shannon Semiconductor Technology's shares fell to the daily trading limit even though the company announced profit growth of more than 2,000%.
Similarly, Shenzhen Techwinsemi Technology saw its share price decline despite expecting a net profit increase of up to 5,600%.
Memory chip manufacturer Shenzhen Longsys Electronics reported a profit increase of more than 62,000%, but its share price increase was only temporary before falling again.
Investors are now waiting for the full financial report, which is expected to be announced by the end of August.
They want to see whether this profit growth can be maintained over a longer period, thus proving that the high share price is still worth it.
The AI sector, including hardware manufacturers, computing infrastructure and component suppliers, is expected to continue to benefit from the growing demand for AI technology.
However, China's still slow economic recovery raises concerns about the long-term outlook.
Weak consumer demand and lackluster performance in sectors such as real estate, automotive and livestock indicate that profit growth may not be universal.
In addition, the development of the AI industry overseas and uncertainty over US interest rate policy are also affecting investor sentiment.
Therefore, even though Chinese AI companies are recording incredible profits, the market still needs more evidence before investor confidence can be fully restored.
