On August 17, CLSA released a report indicating that SMIC (00981.HK) had surpassed the upper bounds of its revenue and gross margin projections for the second quarter of 2026. Moreover, the guidance for the third quarter also exceeded market expectations. The company attributed the increase in shipments during the second quarter to expanded production capacity and a surge in orders for AI-related chips. SMIC remains bullish on the demand outlook, highlighting AI advancements, the resurgence of overseas orders, and the push for domestic localization as primary growth catalysts. The company anticipates that wafer prices will hold steady at least through 2026. In light of these developments, CLSA has revised its earnings forecasts for SMIC upward by 69%, 44%, and 38% for 2026, 2027, and 2028, respectively. Consequently, it has raised the target prices for SMIC's H-shares and A-shares to HK$97.5 and RMB 180.2, respectively, while maintaining an 'Outperform' rating.