What happened

Shares of ACM Research (NASDAQ:ACMR) were moving higher today as Chinese stocks surged after a state-run newspaper said that a healthy bull market was especially important following the pandemic. The news lifted the Shanghai Composite by 5.8%, its biggest one-day gain in five years, and also propelled stocks with close business ties to China, like ACM Research.

As of 12:49 p.m. EDT, ACM was up 23.6%.

A semiconductor undergoing a probe test

Image source: Getty Images.

So what

ACM, which specializes in semiconductor cleaning technology, is based in California, but does the majority of its business in China.

Its two biggest customers, Yangtze Memory Technologies and Shanghai Huali Microelectronics Corporation, are both Chinese and account for 27.5% and 26.5% of its revenue, respectively.  

Additionally, 328 of its 361 employees are based in mainland China or Taiwan, showing the vast majority of its business takes place in the world's second-biggest economy. Semiconductors have emerged as an area of national strategic importance for China, seen recently with the battle over Huawei, so investors seem to be betting that the accommodative stance toward the stock market may encourage spending and growth from ACM's Chinese customers, favoring ACM. Renewed trade tensions between China and the U.S. could also push Beijing to further pursue semiconductor independence.

Shares of Hong Kong-based Semiconductor Manufacturing International, China's largest chip-maker, were up 28% in afternoon trading while other Chinese semiconductor stocks had gained double digits, showing the boom in the sector today.

Now what

ACM stock has jumped an incredible 344% year to date as investors seem to be catching on to this unique opportunity in the semiconductor sector. The company is growing fast with revenue up 44% to $107.5 million last year, and margins rapidly expanding as net income nearly tripled to $18.9 million last year, or $0.99 per share.

First-quarter results were impacted by the COVID-19 pandemic but the company still sees revenue rising 21% to 40% for this year. Given the news out of China today, sales could accelerate if the Chinese government gives a boost to the semiconductor industry.