China’s ambitious drive to achieve self-sufficiency in artificial intelligence chips is seeing a surge of investor activity, with several domestic companies recently making their public debuts. While these newly listed firms have captured market attention, industry observers suggest that the real vanguard in China’s quest to reduce its reliance on global leader Nvidia is not among them. Instead, the spotlight is increasingly turning towards tech behemoth Huawei and its highly secretive chip design division, HiSilicon.
Huawei, a company renowned for its telecommunications equipment and smartphones, has long signaled its intent to remain a private entity, a stark contrast to the smaller chipmakers that have recently tapped public markets for capital. This private status, however, presents a challenge for mainland investors eager to gain exposure to China’s strategic push in AI hardware. Consequently, investor capital has been directed towards publicly traded companies such as Biren Technology, MetaX, Moore Threads, and Shanghai Iluvatar CoreX Semiconductor. For instance, Moore Threads, a developer of graphics processing units (GPUs) founded in 2020, secured over $1.1 billion in its December listing. MetaX, also a GPU developer, followed suit with a nearly $600 million offering later that month. Additionally, Chinese internet giant Baidu has announced plans to spin off its AI chip subsidiary, Kunlunxin, for a Hong Kong listing.
Despite the market performance of these newer players, analysts widely believe Huawei is poised to maintain a dominant position in China’s AI processor and GPU landscape. Wei Sun, a principal analyst at Counterpoint Research, emphasizes that Huawei’s strength lies not just in individual chip performance but in its comprehensive “stack.” This refers to the integration across the entire AI computing supply chain, encompassing chip design, data center infrastructure, and software development.
“The reason is not just any single chip, but the stack. That matters more than headline specs,” Sun stated.
Recent analyses suggest a tight race between Huawei and Nvidia in China’s domestic market. Bernstein analysts, in a report, estimated that both companies held approximately 40% of the Chinese processor market by dollar value. However, under potential export restrictions, Nvidia’s share is projected to shrink significantly, while Huawei’s could surge to a commanding 50% market share, contingent on policy shifts. Smaller Chinese firms like Cambricon are expected to hold a modest share, with others trailing further behind. This dynamic is likely to drive industry consolidation, as smaller players may seek to merge with larger entities to fund the substantial research and development investments required in the semiconductor industry.
Huawei has been steadily expanding its Ascend series of AI chips, with its next-generation Ascend 950 slated for release in 2026. While these chips may not yet match the raw performance of Nvidia’s most advanced offerings on a chip-to-chip basis, Huawei’s holistic approach to the AI ecosystem sets it apart. The company’s “AI CloudMatrix 384” system, designed to link numerous Ascend chips for maximized performance, has reportedly outperformed leading Nvidia systems on certain benchmarks. Furthermore, Huawei is actively developing its CANN software layer to rival Nvidia’s CUDA, creating direct competition across multiple crucial layers of the AI ecosystem.
However, this pursuit of a full-stack solution is not exclusive to Huawei. Other Chinese tech giants, including Baidu, are also adopting similar integrated strategies.
A significant hurdle for many newly listed Chinese AI chip companies is production capacity. Firms like Moore Threads primarily focus on chip design, relying on third-party foundries for manufacturing. The primary domestic foundry for such advanced semiconductor production in China is Semiconductor Manufacturing International Corp. (SMIC). However, SMIC’s production capabilities are limited, and Huawei has reportedly been given priority access, constraining output for other emerging GPU makers.
“The situation at SMIC, where Huawei is being prioritized, probably under some direction from industrial planning authorities, leaves little capacity for the other leading GPU makers such as Biren, MetaX, Enflame, Illuvatar, Sophgo, and others,” noted Paul Triolo, Partner and Senior VP for China at DGA Group. “Once some of the new companies burn through IPO revenue, there could be a reckoning if they can’t get sufficient production at SMIC and the market uptake for their product is slow.”
Despite its current dominance and strategic importance, Huawei’s private status is expected to persist. Investor appetite for a publicly listed Huawei would undoubtedly be substantial, given its broad product portfolio and leading-edge AI development. However, Huawei founder Ren Zhengfei has historically prioritized internal control over external shareholder demands. Moreover, the profitability of Huawei’s established businesses reduces its immediate need for capital raising, a factor amplified by Beijing’s strong backing of the domestic semiconductor industry. While a future listing cannot be entirely ruled out, particularly in a post-Ren era, the company’s current financial strength and R&D funding capabilities, fueled by its telecommunications and smartphone divisions, suggest a continued private operation for the foreseeable future.
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