Lender expects ‘robust’ growth in AI-related spending to boost electrical machinery and equipment industry
[SINGAPORE] China’s advanced manufacturing sector will emerge as a key beneficiary of the artificial intelligence up-cycle, said the Bank of Singapore (BOS).
Sectors that the private bank identified as potential beneficiaries include electric vehicles, solar equipment, industrial machinery and robotics.
BOS expects AI-related capex by leading Chinese technology and platform companies to see “robust growth”, at a rate of more than 20 per cent on a compounded basis over the next few years.
This increase in spending will result in sustained demand for electrical integrated circuits within the electrical machinery and equipment industry, given their wide range of applications in AI infrastructure.
BOS’ 2026 Supertrends report noted that electrical machinery and equipment accounted for half of the East Asian giant’s 14.5 per cent year-on-year export growth in the first quarter of 2026.
The lender also expects the benefits of AI in China to be “diffused, rather than concentrated”, as the reach of AI will extend beyond just technology firms and manufacturers to across the whole market.
Overall, this will translate to higher productivity and competitiveness across the country’s supply chain, it added.
“China is one of the biggest beneficiaries of AI capex,” said Jean Chia, global chief investment officer at BOS, in her opening remarks during BOS’ Portfolio Summit on Thursday (Jul 16).
Diverging performance
However, BOS expects the industrial up-cycle to be unevenly reflected in Chinese equities, with onshore A-shares offering potentially better returns than stocks in offshore markets.
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“China is really a tale of two markets, in terms of the domestic (market) as well as the offshore (markets),” said Chia at the Sands Expo and Convention Centre.
Onshore equities are stocks listed on the country’s bourses, while offshore equities refer to those that are listed in other markets.
“In the offshore Chinese equities market, sentiment has been weighed down by sluggish activity data, especially for retail sales, and concerns about new regulatory requirements on outbound investments,” said BOS.
The upcoming second-quarter FY2026 results will be an “inflection point”, it noted, adding that index-heavy technology companies “could have seen the peak” of food-delivery and quick-commerce subsidies.
“If the Q2 FY2026 results show material improvement, this could support upward earnings revisions for this index-heavy sub-sector.”
On the other hand, BOS reiterated its support for onshore Chinese A-shares, while also pushing for a “barbell strategy”.
This means advocating for equities with quality yield plays to cushion market volatility, while also having upside optionality in AI proxies, such as upstream power equipment and energy storage.
