China’s lab-grown diamonds emerge as unlikely winner in AI boom

China’s lab-grown diamonds are emerging as a surprising beneficiary of the artificial intelligence boom, with demand climbing while they gain traction as a key component in advanced chipmaking.

Traditionally associated with jewelry, these synthetic gems are now being adopted as chip?cooling materials, enabling denser and more powerful AI semiconductors.

Momentum has accelerated after several Chinese producers reported that clients validated their diamonds as effective heat spreaders and began commercial shipments.

Shares of related firms have staged sharp rallies, with Zhecheng Huifeng Diamond Technology Co and SF Diamond Co jumping 51% and 40% last week, respectively, and extending gains into this week. Their performance far outpaced the CSI 300 Index’s rise of 1%.

Gains in this niche segment underscore investors’ search for new AI winners, as crowded hardware bets, from printed circuit boards to optical modules, have grown more expensive after a sharp rally.

The surge also highlights a shift toward next?generation cooling materials, with analysts noting that diamond is increasingly viewed as a superior alternative to traditional solutions like copper or aluminum.

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“Diamond cooling is moving toward an industry consensus, with applications expected to expand across AI and data centres,” Huayuan Securities analysts wrote in a note on Monday.

Shares of Chinese companies associated with the more traditional materials, such as Aluminum Corp of China and Jiangxi Copper Co, had previously rallied on AI optimism, but have fallen about 25% and 28% from their recent peaks in January in Hong Kong, respectively.

Meanwhile, SF Diamond has started shipping diamond heat spreaders in small batches after passing overseas client testing, according to a company disclosure on an exchange-run investor discussion platform.

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Henan Liliang Diamond Co has also disclosed that it started first-phase production of its high-power heat spreader project.

After two to three years of heavy positioning in core AI sectors, many funds are now rotating quickly to target micro?segments with the strongest fundamentals, tightest supply and greatest pricing power, said Duan Bing, Nomura’s China tech and telecom analyst.

“Supply chain research needs to keep going deeper,” Duan said.

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