China’s Overlooked AI Infrastructure Companies Could Be the Next Big Investment Opportunity

While much of the world’s attention remains fixed on China’s leading artificial intelligence developers and internet giants, some investors believe the country’s biggest AI opportunity lies elsewhere. According to KraneShares Chief Investment Officer Brendan Ahern, the companies building the technology that powers AI—often referred to as the “picks and shovels” businesses—are still largely overlooked by global investors. 

Rather than focusing solely on AI models or consumer-facing applications, Ahern argues that investors should pay closer attention to firms producing semiconductors, networking equipment, manufacturing tools, industrial automation systems, and other critical technologies that make AI possible.

The “picks and shovels” analogy comes from the California Gold Rush, when the greatest profits often went not to the miners searching for gold, but to the businesses supplying the tools they needed. Ahern believes a similar trend is emerging in artificial intelligence, where companies providing the infrastructure for AI development may enjoy long-term demand regardless of which AI platform ultimately dominates the market. 

China has spent years investing heavily in technological self-sufficiency, especially in response to export restrictions and geopolitical tensions. That strategy has accelerated investment in domestic semiconductor production, advanced manufacturing, robotics, optical networking, and AI hardware.

According to Ahern, these industries are becoming increasingly important as China builds a complete AI ecosystem capable of competing with global leaders. While internet companies such as Alibaba, Tencent and Baidu continue to attract investor attention, many of the businesses supplying chips, specialised equipment and industrial technology remain underappreciated despite their growing strategic importance. 

China’s AI ambitions extend well beyond software. Building powerful AI systems requires enormous computing capacity, advanced data centres, high-speed networking, specialised memory chips and precision manufacturing equipment. Every stage of that supply chain creates opportunities for companies that manufacture the essential components needed to keep AI systems running.

Ahern believes many of these firms are positioned to benefit from years of sustained investment as China continues expanding its AI infrastructure. Even if competition among AI model developers intensifies, the demand for the underlying technology is expected to remain strong.

He also notes that many Chinese technology companies continue to trade at valuations that appear attractive compared with some of their global peers. Investor caution surrounding China’s economy and geopolitical risks has kept valuations relatively subdued, potentially creating opportunities for long-term investors willing to look beyond short-term market sentiment. 

At the same time, China’s determination to reduce its dependence on foreign technology has encouraged greater domestic innovation. The country is investing billions in semiconductor manufacturing, AI computing, robotics and industrial automation, with government policies providing additional support for strategic technology sectors.

Despite these positives, Ahern acknowledges that investing in China is not without challenges. Regulatory changes, international trade tensions and economic uncertainty remain important risks that investors must consider. Competition within China’s technology sector is also intense, meaning not every company will emerge as a winner.

For that reason, he believes investors should focus on businesses with durable competitive advantages, strong technological capabilities and critical positions within the AI supply chain rather than chasing short-term excitement around individual AI applications.

As the global AI race accelerates, Ahern’s message is that the next generation of winners may not necessarily be the companies creating the most popular AI models. Instead, the businesses supplying the chips, equipment, networking technology and industrial infrastructure that make AI possible could become some of the most valuable players in the industry.

While these companies may receive less attention today, their importance is likely to grow as artificial intelligence continues to expand across industries, making China’s AI “picks and shovels” firms a segment investors may no longer be able to ignore.