Morgan Stanley raises Semiconductor Manufacturing International Corporation's (00981) target price to HK$40 and upgrades the rating to "in line with the market".

Morgan Stanley's research report stated that driven by China's artificial intelligence (AI) large model "DeepSeek", the demand for AI chips is expected to increase along with the surge in AI inference demand. Due to the limited supply of American AI graphic processors and the increasing demand for Chinese chips, Semiconductor Manufacturing International Corporation (00981) is expected to become the main supporter of China's AI chip design sector. Morgan Stanley mentioned that although Semiconductor Manufacturing International Corporation's production capacity may also be limited by equipment bottlenecks, the company is estimated to produce 3.6 million AI graphic processor units per year, which can meet the domestic demand in China. The bank has raised the target price of SMIC from HK$38 to HK$40, and upgraded the rating from "underperform" to "in line with the market".