Shares of Chinese technology giant Baidu climbed more than 7% in Hong Kong on Monday after a report said its artificial intelligence chip subsidiary, Kunlunxin, is preparing for a Hong Kong initial public offering that could value the business at as much as $50 billion.

The rally comes as Chinese AI chipmakers increasingly attract investor interest amid Beijing’s push to reduce dependence on foreign semiconductor technology and challenge U.S. dominance in the rapidly expanding AI hardware market.

According to The Information, citing two people familiar with the matter, prospective investors have been asked to commit to purchasing semiconductor products worth three to seven times the value of their intended investment in Kunlunxin’s planned share sale, an unusual structure designed to demonstrate commercial demand for the company’s chips while strengthening customer relationships.

The report added that Baidu confidentially submitted a listing application for Kunlunxin to the Hong Kong Stock Exchange earlier this year, although the size, valuation, and final structure of the offering had yet to be determined.

Neither Baidu nor Kunlunxin has publicly commented on the report.

Founded in 2011, Kunlunxin was established to develop artificial intelligence processors primarily for Baidu’s own cloud computing, search, and large language model businesses.

Although Baidu continues to hold a controlling stake, the semiconductor company has increasingly operated as an independent business and has expanded sales to external customers over the past two years, positioning itself as one of China’s emerging domestic AI chip suppliers.

The company develops AI accelerators used for machine learning inference, cloud computing, autonomous driving and generative AI workloads, areas that have become strategic priorities for China following tightening U.S. export restrictions on advanced semiconductor technologies.

ByteDance, the owner of TikTok, had expressed interest in Kunlunxin’s processors as Chinese technology companies diversify chip suppliers amid restrictions on access to leading-edge U.S. AI hardware, according to a Reuters report.

The potential IPO comes as China accelerates investment across the AI value chain, spanning semiconductors, computing infrastructure, cloud services and foundation models.

U.S. export controls have significantly limited Chinese companies’ access to the most advanced AI processors produced by Nvidia and other American firms, prompting Beijing to support domestic alternatives capable of powering increasingly sophisticated AI applications.

That effort has benefited companies including Kunlunxin, Huawei’s semiconductor operations, Cambricon, and other Chinese chip developers seeking to build competitive AI computing platforms. Investor enthusiasm reflects expectations that demand for domestic AI chips will continue rising as Chinese cloud providers, internet companies and industrial users expand deployment of large language models and AI-powered applications.

China Narrowing The Technology Gap

While the United States maintains a clear lead in advanced AI semiconductors, analysts believe China is narrowing the gap.

According to Brussels-based economic think tank Bruegel, the United States currently remains ahead in what it described as the artificial intelligence “hardware stack,” encompassing the advanced semiconductors, computing infrastructure and supporting technologies required to train and deploy frontier AI models.

“Despite Chinese progress, the United States remains for now ahead in the race for dominance over the so-called artificial intelligence hardware stack – the resources and equipment, especially semiconductors, needed to run AI models,” Bruegel said in a recent report.

However, the think tank noted that China’s progress has become increasingly evident.

“The signs of Chinese catch-up are real,” Bruegel added, citing China’s growing open-source AI ecosystem, state-backed research pipeline and a sufficiently large domestic market capable of sustaining AI companies while their technologies mature.

China’s vast home market gives domestic AI hardware developers a significant advantage by providing large-scale commercial deployment opportunities even as international expansion remains constrained by geopolitical tensions.

If completed at a valuation approaching $50 billion, Kunlunxin would become one of the world’s most valuable standalone AI semiconductor companies and one of the largest technology listings in Hong Kong in recent years.

The prospective offering also denotes investor focus from consumer-facing AI applications toward the infrastructure underpinning artificial intelligence, including chips, cloud computing, networking equipment and data centers. That trend has driven soaring valuations for AI hardware companies globally as hyperscalers and technology firms continue investing hundreds of billions of dollars to expand AI computing capacity.

Spinning off Kunlunxin is expected to unlock shareholder value while providing the chipmaker with independent access to capital needed to accelerate research, manufacturing partnerships, and commercial expansion.

Chinese memory chipmaker ChangXin Memory Technologies (CXMT) has secured a long-term supply agreement worth more than 20 billion yuan ($2.94 billion) with internet giant Tencent, in a deal that underscores China’s accelerating push to build a self-sufficient semiconductor ecosystem as demand for artificial intelligence infrastructure continues to surge.

According to people familiar with the matter who spoke to Reuters, the agreement covers the supply of dynamic random-access memory (DRAM) chips for Tencent’s servers over several years. Two sources said the contract runs for as long as three years, while another said it could extend to five years.

The previously undisclosed agreement comes at a pivotal moment for the Hefei-based semiconductor manufacturer as it prepares for one of mainland China’s largest stock market debuts in recent years. In May, the Shanghai Stock Exchange approved CXMT’s application to list on the STAR Market, where the company plans to raise 29.5 billion yuan to finance further expansion.

The size of Tencent’s commitment represents one of the strongest commercial endorsements yet for China’s largest DRAM producer, signaling growing confidence among the country’s biggest technology companies in domestically produced memory chips at a time when geopolitical tensions continue to reshape global semiconductor supply chains.

The agreement is also part of a bigger shift by China’s leading cloud and artificial intelligence companies, which are increasingly seeking to reduce dependence on foreign semiconductor suppliers as U.S. export restrictions continue to limit China’s access to advanced chip technologies.

DRAM chips are indispensable components in modern data centers, powering cloud computing platforms, artificial intelligence training clusters, enterprise databases and high-performance computing systems. Unlike processors that execute calculations, DRAM temporarily stores the massive volumes of data AI models require to operate efficiently. As AI models become larger and more computationally intensive, memory capacity has emerged as one of the industry’s most critical bottlenecks.

The global shortage of advanced memory chips has made long-term supply agreements increasingly valuable.

While details of the contract remain confidential, it was not immediately clear whether the agreement includes CXMT’s high-bandwidth memory (HBM), the premium category of memory used alongside advanced AI processors from companies such as Nvidia and AMD. HBM has become one of the most strategically important components in AI servers because it significantly increases processing speed while reducing power consumption.

Founded in 2016 with strong backing from Chinese state funds, CXMT has become the centerpiece of Beijing’s efforts to establish an indigenous DRAM industry capable of competing with global leaders Samsung Electronics, SK Hynix, and Micron Technology.

The company has long trailed its South Korean and American rivals technologically. However, China’s determination to strengthen semiconductor self-sufficiency has accelerated investment, research, and customer adoption, particularly as export controls imposed by the United States have restricted Chinese companies’ access to advanced foreign semiconductor technologies.

Tencent’s decision to secure multi-year supplies from CXMT illustrates how China’s largest internet companies are increasingly integrating domestic chipmakers into their long-term AI infrastructure strategies.

The company is not alone.

According to additional sources familiar with the discussions, CXMT is negotiating similar long-term collaborations with several other major Chinese technology companies. Its IPO prospectus already identifies Tencent, Alibaba Cloud, ByteDance, Lenovo, and Xiaomi among its major customers.

These partnerships are becoming more important as Chinese hyperscale cloud providers rapidly expand artificial intelligence infrastructure to compete with global leaders such as Amazon Web Services, Microsoft Azure and Google Cloud.

The DRAM Market is Having A Field Day

The timing of the agreement also coincides with one of the strongest memory market upcycles in years.

According to UBS, DRAM contract prices surged approximately 95% quarter-on-quarter during the first quarter of 2026 as AI-driven demand collided with constrained supply. The investment bank expects the memory supercycle to continue until at least the end of 2027.

UBS estimates the global memory market could grow to $786 billion this year before expanding further to approximately $1.2 trillion in 2027, fueled largely by investments in generative AI, cloud computing and high-performance data centers.

That favorable pricing environment has dramatically transformed CXMT’s financial performance. The company reported first-quarter revenue of 50.8 billion yuan, representing an extraordinary 700% increase from a year earlier. It also swung to a net profit of 25 billion yuan after recording a loss of 1.6 billion yuan during the same period last year, highlighting how rising memory prices and surging AI demand have reshaped industry economics.

Large cloud computing companies have increasingly responded to supply shortages by locking in future production through multi-year purchasing agreements.

UBS noted that contracts featuring price bands, advance payments and guaranteed purchase volumes have become common across the industry, with some hyperscalers already committing more than half of their projected memory requirements over three-to-five-year periods.

For CXMT, the Tencent agreement provides both predictable revenue and validation ahead of its public listing. The company is simultaneously embarking on one of the largest capacity expansion programmes in China’s semiconductor industry.

Sources familiar with the plans said CXMT has begun constructing a new DRAM manufacturing facility in Shanghai in addition to its existing packaging plant dedicated to high-bandwidth memory products. The company currently operates three 12-inch wafer fabrication plants, including two in Hefei and one in Beijing, with a combined production capacity of roughly 300,000 wafers per month.

Once the new Shanghai facility and other planned expansions become operational, CXMT expects to double production capacity to approximately 600,000 wafers each month, significantly strengthening China’s domestic memory manufacturing capability.

The expansion reflects Beijing’s broader industrial strategy of building resilient domestic semiconductor supply chains capable of supporting future growth in artificial intelligence, advanced manufacturing and cloud computing while reducing exposure to foreign technology restrictions.

Nevertheless, significant technological challenges remain. According to one of the sources familiar with the company’s operations, CXMT encountered relatively low production yields for its next-generation DDR5 memory products during the first quarter, indicating that the company still trails established competitors in manufacturing efficiency and advanced process technology.

Industry analysts note that while China’s memory industry has made remarkable progress in expanding capacity, closing the technology gap with Samsung Electronics and SK Hynix remains a longer-term challenge requiring sustained investment in research, manufacturing expertise, and advanced process engineering.

Even so, the Tencent agreement signals that commercial acceptance of Chinese-made memory chips is accelerating.

Global markets found a measure of relief on Monday after the United States and Iran agreed to halt recent hostilities and renew diplomatic talks, helping to calm oil prices that had spiked earlier in the day amid fresh exchanges of strikes between the two sides.

The return to negotiations followed several days of tit-for-tat military actions sparked by an Iranian projectile striking a cargo vessel in the Strait of Hormuz last week. Both nations had accused each other of violating an interim ceasefire, raising fears of prolonged disruption to one of the world’s most critical energy arteries. The latest pause in fighting offered investors a window to reassess positions, leading to modest gains across equities even as underlying economic concerns persisted.

Europe’s STOXX 600 index rose 0.1% in morning trading, while futures for the U.S. S&P 500 climbed 0.7%. Asian markets also pared earlier losses, with South Korea’s KOSPI down 0.2% and Japan’s Nikkei up 0.15%. Oil initially climbed on Monday following weekend strikes but then reversed, trading near its lowest level since the conflict began. Brent crude was little changed at $72.20 a barrel, marking a 22% decline for the month.

“The market can take some relief in the lower oil prices and its impact on the global economy,” said Mohit Kumar, chief European economist at Jefferies. “Lower oil prices should lead to a diversification trade and growth-sensitive sectors which have suffered in the last few months should outperform.”

This de-escalation provides a timely counterbalance to persistent worries about stretched valuations in AI-related stocks and rising expectations for tighter monetary policy in the United States. Easing energy costs could help moderate some inflationary pressures, but recent data have shown inflation jumping in the U.S. and elsewhere, reinforcing bets that the Federal Reserve may need to raise rates to contain price growth.

Rising odds of a rate hike have supported the dollar, with the dollar index trading at 101.25, just below the one-year high it touched last week. The Japanese yen slipped slightly to 161.80 per U.S. dollar, as fears of potential intervention from Tokyo prevented it from breaking through its lowest level in 40 years.

Investors are now pricing in at least one Federal Reserve rate hike this year, a sharp reversal from expectations of two cuts before the conflict intensified. Bank of America strategists have adopted an even more hawkish stance, forecasting three hikes, partly reflecting resilient U.S. jobs growth.

The stronger dollar has weighed on gold, which fell 0.6% to $4,061 per ounce. The yellow metal is on track for a 13% decline in the second quarter — its biggest quarterly drop since 2013.

Tech Valuations and Sector Rotation Dynamics

Investor unease over AI-related valuations has also lingered. Futures for the tech-heavy Nasdaq rose 1% on Monday, putting the U.S. index on track for a rebound after slumping more than 4% last week. The Bank for International Settlements has cautioned about the durability of the current AI investment surge, noting that supply bottlenecks and intense competition could lead to overinvestment reminiscent of previous boom-and-bust cycles.

“For this reason, traders have gravitated toward the defensive and cyclically oriented areas of the equity space in recent weeks,” said Jose Torres, senior economist at Interactive Brokers.

The ceasefire news encouraged some rotation back into growth-sensitive sectors that had been under pressure from higher energy costs and tighter financial conditions. This shift could gain further traction if lower oil prices translate into reduced input costs and improved consumer confidence.

U.S. Treasury yields were little changed on Monday as investors looked ahead to key jobs data later in the week while monitoring the fragile pause in U.S.-Iran hostilities. The benchmark 10-year Treasury yield rose less than a basis point to 4.376%, while the 2-year yield rose just over 1 basis point to 4.102%.

The 30-year bond yield declined less than one basis point to 4.861%. The bond market will be closed on Friday ahead of Independence Day celebrations. Investors will closely parse May’s JOLTS job openings data on Tuesday and the June nonfarm payrolls report on Thursday to gauge the health of the U.S. economy and refine their expectations for Federal Reserve policy.

A Fragile Diplomatic Window

The U.S. and Iran agreed to pause hostilities and allow commercial vessels to freely pass through the Strait of Hormuz following military clashes over the weekend that had threatened to derail negotiations aimed at ending the conflict.

“Technical talks are slated to continue on all areas of the MOU,” a U.S. official told CNBC on Sunday. “Both sides will stand down for now, and vessels can move freely.”

A sustained return to diplomacy could ease energy market tensions and reduce inflationary pressures globally. However, the situation remains fluid, with both sides quick to accuse the other of violations in recent days. Markets will be watching closely to see whether the latest pause holds and leads to a more comprehensive agreement.

For now, the de-escalation has provided investors with a reason for cautious optimism, allowing some rotation back into growth-sensitive areas that had been under pressure. Yet underlying concerns about inflation, monetary policy, and AI valuations suggest the path ahead remains uncertain.