Morgan Stanley published a report stating that the booming development of AI applications in mainland China and policy support for domestic AI GPUs are expected to boost demand for cutting-edge wafer foundry services in the country over the next two years. The bank upgraded SMIC (00981.HK) from Market Perform to Overweight, raised its 2026/27 earnings per share forecast, and increased its target price by 100% from HK$40 to HK$80, assuming that gross profit margins will increase with improved yield rates and anticipating a higher revenue structure driven by demand for AI high-performance computing. The bank downgraded Hua Hong Semiconductor (01347.HK) from Market Perform to Underweight, citing concerns about the sustainability of its mature node business. The bank raised its target price by 58% from HK$38 to HK$60.