Weekly Buzz: The US squeezed China’s chip supply, so it’s making its own

When life gives you export restrictions, you make your own chips. That's China's approach after years of US sanctions aimed at choking off access to advanced semiconductor technology.

The homegrown solution

China's largest chipmaker SMIC is now testing domestically built lithography machines – devices that carve out AI chips. SMIC will need to scale the machines into a reliable production line to replace what America’s banned, as part of a broader push to build a self-sufficient AI supply chain. China’s government has also banned its own big tech firms – think Alibaba and ByteDance – from buying Nvidia’s chips, forcing them to shop locally instead.

China isn't stopping at hardware either, the country has made significant progress in building out its AI infrastructure. China’s power generation capacity has grown more than tenfold since 2000, reaching 3,218 gigawatts (GW) in 2024 and now more than 2.5 times that of the US.

Investors see the potential in China’s tech sector: they’ve sent the Hang Seng Tech Index up 44% in 2025 so far, putting it at a four-year high. At this stage, it’s more of a "build now, monetise later" strategy. Most Chinese companies are in heavy investment mode, pouring money into R&D and infrastructure.

What does this mean for you?

Tech makes up more than half of Chinese stock indices, so the trajectory of the country’s AI development is critical for the long-term prospects of investing in China. It’s a global matter too – DeepSeek's breakthrough earlier this year rattled tech equities worldwide.

AI is shaping up to be the defining technology race of our time. The real contest isn’t just about “who owns the most GPUs” – it's about who can build and sustain the entire AI stack end to end: the chips that process the information, the power to run the data centers, and the software that consumers use.

(For our deep dive into China’s tech, stay tuned for our latest CIO Insights next month.)

📰 In Other News: Nvidia’s in the mood for a spending spree

Nvidia just pledged £2 billion (US$2.7 billion) to the UK's AI industry – its biggest show of long-term commitment yet. The American chip giant will back Britain's brightest startups across fintech, data centers, AI video generation, and autonomous transport.

Nvidia's clearly in the mood to drop some cash: this pledge came just a day after the company agreed to invest US$5 billion in longtime rival Intel. The pair is planning to work together on chips for computers and data centers. That'll give Nvidia a bigger presence in the personal computing market and help Intel make up lost ground in the data center space.

The message is clear: AI infrastructure spending isn't slowing down. Gartner projects that global AI spending will hit US$1.5 trillion in 2025, ultimately exceeding US$2 trillion by 2026. Nvidia's UK commitment demonstrates that companies are now making decade-long bets on physical presence, manufacturing capacity, and regional partnerships. For investors, this suggests the AI story is entering a more mature phase – one built more on concrete infrastructure than promising demos.

(You don't need to be in Silicon Valley to take part in AI. Thematic Portfolio lets you invest in the big themes happening around the world.)

This article was written in collaboration with Finimize.