Woofun AI reports that Citigroup has upgraded its outlook for China's AI-PCB sector, citing structural shifts in server and network infrastructure. The bank raised its total addressable market forecast for AI-PCBs to RMB 152 billion in 2026, RMB 307 billion in 2027, and RMB 562 billion in 2028, representing year-on-year growth rates of 86%, 102%, and 83% respectively. This revised model incorporates CPU and optical module PCB demand, marking the first inclusion of a 2028 projection.

Citigroup anticipates that by 2027, ASICs will lead AI-PCB demand at 34%, followed by Nvidia GPUs at 24%, CPUs at 16%, switches at 14%, and optical modules at 12%. Network-related components exhibit the strongest growth trajectory, with 1.6T optical modules and switches driving PCB growth by 135% in 2026 and 178% in 2027.

Notably, Google TPU-related PCB procurement is projected to reach $16 billion by 2028, potentially surpassing Nvidia GPU demand. Between 2027 and 2028, Google TPUs are expected to contribute 30% of incremental demand, while Nvidia accounts for 25%, with switches and optical modules each contributing 14%.

Capacity constraints may emerge as a critical bottleneck. Citigroup predicts that new PCB capacity expansion announcements could begin in the second half of 2026 to meet 2028 demand. Mainland Chinese PCB manufacturers typically require 13 to 15 months from greenfield project initiation to mass production, while upstream fiberglass and copper-clad laminate (CCL) expansions may take up to 18 months. This timeline suggests further tightening in AI-CCL supply, benefiting first-line manufacturers with raw material locking capabilities. Consequently, profit visibility for these firms is expected to improve in 2027.

On individual equities, Citigroup maintains a 'Buy' rating for Huaneng Power International and Sihui Technology. Huaneng Power International's target price was raised from 119 yuan to 189 yuan, reflecting strong delivery capabilities in data center switch and AI server PCBs. The bank forecasts net profits of 6.7 billion yuan, 12.1 billion yuan, and 23.2 billion yuan for 2026, 2027, and 2028 respectively, implying an annual compound growth rate of 86%.

Meanwhile, SMIC's target price was increased from ¥415 to ¥456. Although the 2026 net profit forecast was lowered due to weaker-than-expected revenue from Rubin, Citigroup expects stable profits in 2027 and introduced a 2028 net profit forecast of ¥23.2 billion. SMIC's valuation premium remains supported by its long-term relationship with Nvidia, HDI capacity, and potential opportunities in data center switches and ASICs.

However, risks persist, including lower-than-expected GenAI order shares, yield issues, automotive supply chain price competition, reduced cloud vendor capital expenditure, weakening macro demand, rising material costs, and geopolitical tensions between China and the U.S. Overall, Citigroup assesses that AI-PCB demand is diversifying beyond Nvidia GPUs to include ASICs, Google TPUs, high-speed switches, and optical modules. Chinese PCB leaders possessing advanced processes, customer resources, and material security capabilities are positioned as core beneficiaries of this AI infrastructure expansion.