China’s Hidden AI Giants: How to Invest in China’s Silicon Valley

When most investors think about “China Tech”, the immediate association is often with familiar internet platforms and consumer-facing applications such as Tencent’s WeChat, Alibaba’s Taobao, or Meituan’s food delivery ecosystem.

These companies are grouped under the Hang Seng TECH Index, representing the world of internet platforms, e-commerce, social media, and digital services, commonly referred to as “Soft Tech”.

However, beneath these consumer applications lies another critical layer of the technology ecosystem. None of these digital services can function without the underlying infrastructure powering them. There is a vast industry involved in manufacturing semiconductor chips used in smartphones, EV batteries powering electric vehicles, AI chips operating inside large-scale data centres, as well as robotics, biotechnology, and industrial automation systems driving China’s next phase of technological development. This ecosystem is commonly referred to as “Hard Tech”.

While soft tech focuses on scalable digital solutions and user experience, hard tech creates the physical and tangible infrastructure underpinning the broader technology ecosystem.

This article explores the distinctions between China’s hard tech and soft tech ecosystems, and how investors may potentially use the STAR and ChiNext markets to gain broader exposure across China’s full technology landscape.

The Two Tech Ecosystems

While global attention has largely focused on regulatory developments surrounding China’s internet giants, Mainland China’s capital markets, particularly the STAR Market on the Shanghai Stock Exchange and the ChiNext Market on the Shenzhen Stock Exchange, have quietly nurtured a growing ecosystem of deep-tech companies.

This forms the foundation of China’s “two tech ecosystems”.

The first ecosystem is represented by the Hang Seng TECH Index based in Hong Kong. This ecosystem consists primarily of platform companies. Historically, many of China’s largest technology firms chose to list in Hong Kong due to easier access to international capital and global investors.

These businesses are generally asset-light. Rather than manufacturing physical products or hardware, they focus on building digital ecosystems. Take for example, an app. It carries no physical form, yet it can connect millions of users, merchants, and advertisers on a single platform. This is the essence of the platform economy.

The second ecosystem is based in Mainland China. In 2019, China launched the STAR Market in Shanghai, officially known as the Science and Technology Innovation Board. It is often described as the “Nasdaq of China”.

The STAR Market has stringent listing requirements. Companies must operate within strategic industries such as semiconductors, advanced manufacturing, or industrial automation. The market was designed specifically to provide hard tech companies with access to capital needed for innovation in industries regarded as strategically important to China’s long-term competitiveness.

Alongside the STAR Market is the ChiNext Board in Shenzhen, which was established in 2009. The ChiNext Board focuses on high-growth and innovative private enterprises. While broader in scope than the STAR Market, it remains heavily concentrated in technology and health-tech sectors.

Together, these ecosystems form the CSI STAR and ChiNext 50 Index, which provides exposure to 50 of the largest and most liquid companies listed across both innovation-driven boards.

Why Investors Should Not Ignore Hard Tech

China’s broader objective is to reduce dependence on foreign technology in critical areas such as semiconductors, artificial intelligence, industrial software, robotics, and advanced manufacturing. Geopolitical tensions and supply chain vulnerabilities over recent years have further reinforced the importance of technological self-sufficiency.

While the companies within the Hang Seng TECH Index continue to benefit from domestic consumption and the digital economy, the STAR and ChiNext ecosystems focus on companies building China’s technological infrastructure. These include semiconductor manufacturers, AI computing infrastructure providers, EV supply chain players, and industrial automation companies.

For investors seeking to understand where long-term policy tailwinds may potentially emerge, analysing only internet platforms may provide an incomplete picture. The hardware and infrastructure powering future technologies may be equally important.

These observations also align with insights gathered during The Joyful Investors’ recent study trip to Beijing, which focused on developments in robotics and artificial intelligence.

As of 19 May 2026, the largest holding in the index is Zhongji Innolight, representing 14.6% of the index weight.

Zhongji Innolight manufactures optical transceivers, devices that convert electrical signals into light signals for ultra-fast data transmission through fibre optic cables within data centres. These components are essential for enabling communication between thousands of GPUs inside AI data centres.

The company is currently the world’s largest optical transceiver manufacturer for AI data centres and serves as a core optics supplier to NVIDIA. As AI data centre spending by global hyperscalers continues expanding, Zhongji Innolight benefits directly from this trend.

Its closest US equivalent is Coherent Corp.

The second-largest holding is Eoptolink with approximately 10.0% weighting. Like Zhongji Innolight, Eoptolink specialises in optical transceivers and is another beneficiary of the AI data centre expansion cycle.

Combined, Zhongji Innolight and Eoptolink account for roughly 24.6% of the index weight and are directly linked to AI infrastructure connectivity.

The third-largest holding is CATL.

While investors may be increasingly familiar with electric vehicle brands such as Tesla and BYD, CATL remains one of the most important players in the EV supply chain.

CATL is currently the world’s largest EV battery manufacturer, with close to 39% global market share according to SNE Research. Its batteries are used across major global automotive brands including Tesla, BMW, and Volkswagen. To date, CATL batteries have been installed in more than 24 million vehicles worldwide.