Goldman Sachs is bullish on Chinese tech stocks! Fundamentals remain constructive, with opportunities in 11 major sub-sectors.

Goldman Sachs Group, Inc. said in a research report released on October 19 that, against the backdrop of current market volatility and seasonal factors, the bank reviewed 11 sub-sectors of China's technology industry and highlighted their core investment logic. The bank believes that fundamentals remain constructive, mainly reflected in the following aspects: (1) Generative AI is driving growth in AI server shipments and specification upgrades, benefiting global leading companies in areas such as semiconductors (e.g., Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR), optical communications (e.g., Eoptolink Technology Inc.,), PCB (e.g., Victory Giant Technology), and ODM (e.g., Hon Hai/Foxconn Industrial Internet); (2) AI spending is expanding from leading cloud service providers (CSPs) to NeoCloud/enterprise customers, supporting the AI infrastructure upcycle; (3) In consumer electronics, with memory costs remaining elevated, leading brands and high-end models are relatively less affected. GEO Group Inc geopolitical tensions and policy remain key variables in the AI server supply chain. However, the platform transition for AI server racks is nearing completion, which will support growth in the coming quarters. After separately assessing demand, supply conditions, and investment opportunities in each sub-sector, the bank reiterated "Buy" ratings for the following names: (1) Semiconductors: Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSMC.US), MediaTek, Semiconductor Manufacturing International Corporation (00981, 688981.SH), Hua Hong (01347), CXMT Corporation (688825.SH), Advanced Micro-Fabrication Equipment Inc. China (688012.SH), NAURA Technology Group (002371.SZ); (2) Optical communications: Eoptolink Technology Inc., (300502.SZ), Robotechnik Intelligent Technology (03757), VPEC, Zhejiang Lante Optics (688127.SH), FOCI; (3) AI servers: Hon Hai/Foxconn Industrial Internet (601138.SH), Wiwynn/Wistron, AVC/Fositek, Hainan Jinpan Smart Technology/King Slide, Luxshare Precision Industry (02475); (4) PC: Lenovo, Huaqin; (5) Smartphones and iPhone: SZS, Lingyi Itech (002600.SZ); (6) PCB/CCL/ABF: Shengyi Technology (600183.SS), Victory Giant Technology (300476.SZ), Wus Printed Circuit (002463.SZ), Shennan Circuits (002916.SZ), Taiwan Union Technology (Elite Material); (7) Satellites: UMT, WNC, Tongyu Communication Inc.; (8) Autonomous driving/Robotaxi: Pony.ai (02026), WeRide (00800), Horizon Robotics/Siasun Robot&Automation (09660); (9) Power: Delta Electronics, INNOSCIENCE (02577). The following are the details for each sub-sector. 1. Semiconductors Goldman Sachs Group, Inc. expects that, as generative AI simultaneously drives AI server shipments and specification upgrades, and the "local for local" strategy promotes supplier diversification and ensures supply, semiconductor capital expenditure in memory chips and advanced processes will continue to grow. Goldman Sachs Group, Inc. expects that capacity expansion in advanced processes and memory chips will benefit segments of the semiconductor supply chain including foundry, memory chips, AI chips, semiconductor production equipment (SPE), and advanced packaging. In memory chips, the bank expects strong growth in China DRAM and HBM, mainly driven by strong growth in AI server shipments and a continued increase in the number of AI models. At the same time, companies are expanding capacity to meet customer demand and promote supply chain diversification. Buy: Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, MediaTek, Semiconductor Manufacturing International Corporation, Hua Hong Semiconductor, ChangXin Memory Technologies, Advanced Micro-Fabrication Equipment Inc. China. 2. Optical Communications Goldman Sachs Group, Inc. is bullish on TAL Education Group Sponsored ADR Class A growth in the optical module market, mainly driven by continued growth in AI spending, product mix upgrades toward 800G/1.6T and higher transmission rates, and increasing adoption of optical communications in interconnect applications. The bank expects 800G/1.6T optical module shipments to reach 45 million/33 million units in 2026, respectively, and further grow to 49 million/71 million units in 2027; meanwhile, 3.2T optical modules are expected to ramp up gradually in 2027/2028, with shipments expected to reach 23 million/68 million units (report link). As AI infrastructure continues to expand and computing power per link continues to increase, the bank expects the total addressable market (TAM) to expand from Scale-out to Scale-up, benefiting products such as pluggable optical modules, NPO, and CPO (report link). Buy: Eoptolink Technology Inc.,, Robotechnik, Eoptolink, Landmark, VPEC, Largan, FOCI. 3. AI Servers Goldman Sachs Group, Inc. expects AI servers to see further volume growth, mainly driven by continued growth in generative AI infrastructure investment and specification upgrades brought by new platform migration. The bank expects AI server rack shipments to grow year-on-year by 238%, 75%, and 49% in 2026-2028, respectively, and expects leading global cloud service providers to become the main customers. Calculated on an 8-GPU-equivalent AI server basis, Goldman Sachs Group, Inc. expects shipments to reach 2.7 million units and 3.3 million units in 2027 and 2028, respectively, mainly driven by growing demand for ASIC-based AI servers, as customized designs enable ASIC AI servers to achieve higher efficiency. Buy: Hon Hai/Foxconn Industrial Internet, Wiwynn/Wistron, AVC/Fositek, King Slide, Luxshare Precision Industry. 4. PC Goldman Sachs Group, Inc. expects global PC shipments to grow year-on-year by -14%, -5%, and 0% in 2026-2028, respectively, reaching 255 million, 243 million, and 244 million units. This forecast takes into account the pressure from rising memory and CPU costs in the near term, as well as the impact of a flattening replacement cycle after the end of the Windows 10 lifecycle. The bank remains bullish on further increases in AI PC penetration in the future, with continuous launches of new AI applications and AI use cases becoming important drivers. Buy: Lenovo, Huaqin. 5. Smartphones and iPhone Goldman Sachs Group, Inc. expects global smartphone shipments to grow year-on-year by -10%, 2%, and 2% in 2026-2028, respectively, mainly considering market saturation and rising memory costs that will pressure consumer purchases. Amid persistent cost pressure, the bank expects the revenue contribution of high-end smartphones to continue rising, as high-end models are relatively less sensitive to price increases. Goldman Sachs Group, Inc. remains bullish on TAL Education Group Sponsored ADR Class A increasing penetration of foldable phones, with leading brand manufacturers continuing to launch new products, such as the foldable iPhone DUO; at the same time, new form factors and new features will also bring new use cases and improve user experience. Buy: SZS, Lingyi Itech, Fositek. 6. PCB/CCL/ABF Goldman Sachs Group, Inc. expects demand for AI server PCB/CCL to continue growing, with specification upgrades driving higher value per unit under the impetus of demand growth and technological progress, while industry capacity continues to expand and capacity utilization remains at a relatively high level. Overall, the bank expects the global AI server PCB/CCL market size to reach US$38 billion/US$22 billion in 2027, respectively, up from the previous US$27 billion/US$19 billion; and further reach US$84 billion/US$48 billion by 2028. This implies a compound annual growth rate of 148%/161% for the total addressable market (TAM) of AI PCB/CCL in 2026-2028, respectively. Buy: Shengyi Technology, Victory Giant Technology, Wus Printed Circuit, Shennan Circuits, Taiwan Union Technology. 7. Low Earth Orbit (LEO) Satellites Goldman Sachs Group, Inc. has seen an acceleration in LEO satellite launches, along with continued growth in the number of LEO satellites in orbit, and expects this momentum to continue. Under its base case, the global number of LEO satellites in orbit is expected to reach 24,000 and 305,000 by 2028 and 2031, respectively, benefiting multiple segments of the satellite industry chain, including operators, ground stations, user terminals, and components. Global satellite operators are actively updating satellite launch plans and expanding satellite applications, including in-flight communications and space data centers, to advance commercialization. Buy: UMT, WNC, Tongyu Communication Inc. 8. Autonomous Driving/Robotaxi Goldman Sachs Group, Inc. sees continued progress in fleet deployment in the China and overseas Robotaxi markets, driven by falling costs, expanding service coverage areas, improved software capabilities, and rising public acceptance. The bank expects China's Robotaxi fleet size to grow from 5,000 vehicles in 2025 to 705,000 vehicles in 2030 and 3.1 million vehicles in 2035; Robotaxi penetration is expected to rise from 0.1% in 2025 to 12% in 2030 and reach 36% in 2035. Overall, the bank remains bullish on increasing autonomous driving penetration, with more affordable solutions and specification upgrades further enhancing consumer interest. Buy: Pony.ai, WeRide, Horizon Robotics/Siasun Robot&Automation. 9. AI Software China National Software & Service industry grew 8.8% in the first eight months of 2026 (8M26), lower than 12.6% in the first eight months of 2025 (8M25). Although Goldman Sachs Group, Inc. sees that software spending remains under pressure as more funds are allocated to AI foundation models and computing platforms, the bank believes that faster commercialization of AI agents and expanding use cases will gradually drive customer IT spending growth. As AI capabilities continue to improve and AI efficiency continues to rise, Goldman Sachs Group, Inc. sees growing willingness among enterprise customers to use AI, for example using AI for interviews and using AI in manufacturing to improve efficiency on the production floor. 10. Telecommunications In the first seven months of 2026 (7M26), 5G base station deployment and the number of new 5G base stations continued to decline year-on-year. As China's 5G infrastructure capital expenditure investment declines, Goldman Sachs Group, Inc. expects 540,000 new 5G base stations in 2026, compared with 588,000 new 5G base stations in 2025 (according to data from China's Ministry of Industry and Information Technology). In addition to the slowdown in 5G base station deployment, Goldman Sachs Group, Inc. also sees pressure on China Telecom Corporation operators from higher value-added tax rates. Since January 2026, the VAT rate has increased from the previous 6% to 9%. However, the bank expects operators to develop new applications to partially offset this impact. In addition, China Telecom Corporation operators have recently launched AI Token packages for ToC (consumer) and ToB (enterprise) users, charging customers through subscription fees or token consumption. 11. Power As AI servers migrate to platforms with stronger computing power and higher requirements are placed on power efficiency and power density, Goldman Sachs Group, Inc. expects 400VDC and 800VDC solutions to ramp up gradually. Overall, the bank believes there are meaningful incremental opportunities for high-voltage direct current (HVDC) solutions, while value per unit will also increase. The bank also sees increasing adoption of GaN products, which can achieve higher switching frequencies to meet the power density requirements of 800V HVDC and help customers reduce power losses. Buy: Delta Electronics, INNOSCIENCE.