The AI Race Between China and the U.S. Heats Up. These Stocks Could Be Winners, Bernstein Says

Why It Matters

The analysis signals a shift in AI investment focus toward energy infrastructure and domestic chipmakers, reshaping global tech valuations and supply‑chain dynamics.

Key Takeaways

• China adds 500 GW power capacity last year
• Bernstein forecasts China 1,936 ZFLOPs AI compute by 2035
• CATL and Sungrow receive outperform ratings and price targets
• Cambricon and Hygon named top Chinese semiconductor picks
• China AI spend to grow 32% annually through 2035

Pulse Analysis

The AI arms race is increasingly defined by raw compute capacity, a metric that blends semiconductor performance with reliable electricity supply. While the United States maintains a lead in advanced chip design, China’s aggressive expansion of power generation—adding more than 500 gigawatts in a single year—positions it to surpass U.S. compute output by 2035. This strategic emphasis on power infrastructure reduces reliance on imported high‑end chips and enables Chinese firms to train large models using a larger quantity of less sophisticated processors.

Energy firms stand to benefit as China’s AI ambitions drive demand for stable, low‑cost power. Bernstein points to battery giant CATL and solar‑grid specialist Sungrow as beneficiaries, citing their outperform ratings and ambitious price targets. The country’s push for renewable integration, coupled with a burgeoning electric‑vehicle market, fuels a surge in battery production and grid‑scale storage solutions. Investors eyeing the AI sector must therefore consider the broader energy ecosystem, where cheaper renewables and expanding storage capacity underpin the compute boom.

On the semiconductor front, domestic Chinese chip designers such as Cambricon and Hygon are projected to close the efficiency gap with U.S. counterparts, reaching over 50% parity by 2035. This progress, combined with a projected 32% annual increase in AI‑related capital expenditures, suggests a fertile ground for tech‑focused equities. While U.S. AI capex grows modestly at 8% per year, the sheer scale of Chinese investment could reshape global supply chains, prompting multinational investors to diversify exposure toward Chinese semiconductor and energy infrastructure stocks.