Over the past month, the surge in interest surrounding artificial intelligence (AI) advancements has had a tangible impact on the smart driving sectorSeveral exchange-traded funds (ETFs) focused on smart automobiles and intelligent driving have experienced remarkable growth, with multiple funds recording increases exceeding 20%. In contrast, the performance of their counterparts focused on electric vehicles (EVs) has lagged significantly behind, revealing a complex and evolving investment landscape within the automotive sector.

According to various industry participants, intelligent driving systems epitomize a fertile ground for AI-related investments, which have become increasingly relevant in the context of emerging technologiesDespite the growing consensus that smart driving is pivotal to the future of EV developments, it is crucial not to overlook the broad spectrum of investment opportunities existing within the overall EV supply chain.

Numerous ETFs Show Gains of Over 20%

In light of recent market dynamics, the competitive performance of smart automobile ETFs has significantly outpaced EV ETFs.

As per data from Wind, by February 11, smart automobile and intelligent driving themed ETFs had clearly overshadowed those based on new energy vehicles over the past monthFive specific ETFs related to smart automobiles and driving technologies recorded gains greater than 20%, while the highest performer among new energy vehicle ETFs barely exceeded a 10% increase during the same timeframe.

A significant crossover exists between EVs and smart vehicles; most new energy vehicles are rapidly advancing towards enhanced intelligent driving capabilities, which are being projected as central to automakers' competitive strategies

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Yet, a stark divergence can be noted in the performance and weighted shares of related indices within secondary market sectors.

For instance, when comparing the Huaxia CSI Smart Automobile ETF and the Huaxia CSI New Energy Vehicle ETF, it becomes evident that their underlying indices demonstrate marked differences in their leading stocksInformation from the China Securities Index Company indicates that the former indexes track the CSI Smart Auto Theme Index, while the latter focuses on the CSI New Energy Vehicle IndexThis structural difference is highlighted by the predominance of semiconductor, electronic, and passenger vehicle-related stocks in the smart automobile index, contrasting sharply with the lithium battery and non-ferrous metal-focused stocks of the new energy vehicle index.

By analyzing the leading sectors of each index, one can observe that the smart automobile index has gravitated towards industries deeply integrated with intelligent applicationsBoth semiconductor and electronics are recognized as critical areas for artificial intelligence development, while the new energy vehicle index is primarily concentrated on supply chain components, such as lithium and battery manufacturing.

As of February 10, data from the China Securities Index Company indicated that the CSI Smart Automobile Theme Index had experienced a remarkable increase of 22.98% in the past month, with a year-to-date rise of 14.85%. Conversely, the CSI New Energy Vehicle Index saw a more modest growth of 11.15% over the same time frame, achieving a year-to-date increase of 6.41%.

The substantial rise in the smart automobile ETF can largely be attributed to the ongoing 'AI' trend that gained momentum at the beginning of the year, which has propelled numerous semiconductor and electronics stocks to significant increases

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This divergence in performance can be directly linked to recent market trends and technological advancements.

Numerous Investment Opportunities Available

Currently, automotive manufacturers face intensified competition revolving not just around battery performance, but in fact, increasingly emphasizing strategic technological advancements in intelligent systems.

On the night of February 10, BYD hosted a strategic unveiling of its intelligent driving system, dubbed "Eye of the God," covering its entire range of models and far exceeding market expectationsThe previous evening, Changan Automobile had announced its "Beidou Tian Shu 2.0" initiative, claiming a commitment to advancing towards universal intelligence in driving.

The investment momentum in artificial intelligence is swiftly converging on the realm of intelligent driving applications.

According to the latest research report from CITIC Securities, the launch of the Deepseek large model has reinforced the investment narrative around AI in China, particularly concerning robotics, smart driving, and the low-altitude economy – all core applications of AI that are poised to benefit significantlyThe report further emphasizes the valuation reshaping that is anticipated for the complete vehicle and smart driving industry chains by the year 2025, which is projected as a pivotal moment in the sector's evolution.

"Intelligent driving exemplifies the fusion of real-time decision-making, multi-modal perception, and big data training technologies, positioning it as one of the most promising and potent applications of AI," noted Han Wei, Managing Director at Taishi Investment, during an interview.

From both horizontal and vertical perspectives, Han indicated that the valuation of the intelligent driving sector already anticipates technological breakthroughs; "investors must remember that the AI sector is a field of technological revolution, with such breakthroughs often delivering disruptive impacts on industry leaders."

While it is clear that intelligent driving represents a crucial direction for the future of EVs, investment analyst Bi Meng'An proposed that opportunities extend well beyond this singular focus.

"China has made remarkable progress in intelligent driving technologies this year; the 'Eye of the God' system showcases advancements in sensor fusion, algorithm optimization, and computational power enhancement," stated Bi Meng'An.

Bi suggested that aside from the intelligent driving field, alternative investment prospects still exist within the entire EV supply chain, including upstream core components, midstream vehicle manufacturing, and downstream automotive services

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