China's BSE 50 index extends gains to 4%

China's BSE 50 index extends gains to 4%

The China BSE 50 index has extended its gains, reaching a 4% increase as of September 2, 2025. This upward trend is driven by several key factors, including the strengthening energy partnership between Russia and China, as well as the evolving dynamics in the Chinese AI chip market.

Energy Partnership Boosts Market Sentiment

Russian President Vladimir Putin's recent four-day visit to China resulted in a series of significant energy deals, further cementing the partnership between the two countries. These deals include agreements on the construction of the Power of Siberia 2 pipeline, as well as an increase in crude oil supplies to China via Kazakhstan. The Russian Energy Minister Sergei Tsivilev emphasized that the pipeline memorandum for the Power of Siberia 2 project is in the pre-feasibility study phase, with a financing scheme expected to be ready by next year [1].

The deals were signed despite the Russian Ministry of Finance reporting record-low gas and oil revenues this week. Additionally, Russian LNG champion Novatek confirmed the delivery of the first cargo from its Arctic LNG 2 project to China, despite international sanctions. These developments have bolstered investor confidence in the energy sector, contributing to the overall market sentiment.

AI Chip Market Dynamics

In the AI chip market, Nvidia's market share has declined from 66% to 54% in 2025 due to U.S. export controls and the rise of local competitors like Cambricon and Huawei. Cambricon's revenue surged by 4,300%, and Huawei's AI chips now power 85% of China Mobile's cloud infrastructure. These developments have reshaped the competitive landscape, with government subsidies and mandates accelerating the growth of domestic chipmakers.

Nvidia's strategic response includes securing TSMC’s CoWoS packaging technology and developing modified chips like the A800 and H800 to comply with U.S. export rules. The company's most critical gambit is the B30A chip, which is six times more powerful than the H20 and could reassert its dominance in high-performance training if approved by the U.S. government. However, regulatory uncertainty looms, with Q2 2025 seeing no H20 sales to China and Q3 projections excluding the region entirely due to compliance risks [2].

Investment Implications

The China BSE 50 index's gains reflect a complex interplay of geopolitical and technological factors. While the energy sector benefits from the Russia-China partnership, the AI chip market's evolution presents both challenges and opportunities for investors. Nvidia's position remains tenuous, with its long-term value in China contingent on navigating a volatile geopolitical environment and maintaining technological leadership.

Investors should carefully evaluate the risks and opportunities presented by these developments. The AI accelerator chip market is projected to grow at a 33.19% CAGR through 2032, but Nvidia's ability to capture this growth in China depends on its ability to deliver competitive products and navigate regulatory challenges [2].

References:

[1] https://www.energyintel.com/00000199-147a-d36f-addf-35ff16670000
[2] https://www.ainvest.com/news/nvidia-strategic-position-china-ai-market-regulatory-turmoil-2509/