Which China stocks stand to win From the AI boom? UBS names its picks

 UBS reiterated an Attractive rating on Chinese equities and reshuffled its Greater China focus list, adding five names it believes are positioned for the country's AI build-out.

"We retain our preference for China's tech sector on the back of robust AI-driven growth, innovation leadership, and supportive policy trends," wrote Eva Lee, head of Greater China equities. 

Leading stocks in semiconductor equipment, foundry, AI supply chains and internet platforms are best placed to benefit from accelerating monetization, chip localization and international capital inflows, she said.

The bank added Zhongji Innolight and GDS at portfolio weights of 4.0% and 3.0% respectively, alongside Agricultural Bank of China at 4.0%, and JCET Group and Innovent Biologics at 2.0% each.

On Innolight, UBS said it likes the growth potential in the transceiver business "as AI spending is gradually broadening from pure AI computing chips to connection devices," adding that Nvidia's new chip design with embedded co-packaged optics provides an incremental source of growth. 

Meanwhile, the bank said JCET, as China's leading outsourced assembly and test firm, should be a major beneficiary of chip localization.

UBS removed China Pacific Insurance, Dongfang Electric, Kuaishou, LONGi Green, New Oriental Education and PICC Property and Casualty, while cutting Tencent's weight by six percentage points.

The bank expects mid-teens returns from Chinese equities by June 2027, favoring semicaps and AI supply chain names over internet platforms.