Love cannot save diamonds, but AI can
This year's market style has been extremely extreme. To sum it up in one sentence: assets related to carbon-based life are in a bear market, while those serving silicon-based technology are in a bull market. The chance for carbon-based assets to turn things around lies in obtaining the qualification to serve silicon-based technology.
Cultured diamonds are a prime example. As the quantified value of love associated with diamonds further diminishes and supply is no longer scarce, the average customer price of cultured diamonds, which mainly served carbon-based beings in the past, has dropped by 90%. Leading enterprises such as Huanghe Whirlwind and Zhongbing Hongjian have fallen into losses, and their stock prices have also dropped by 80% from their peak.
However, cultured diamonds have unexpectedly staged a comeback this year. Since the beginning of the year, the cultured diamond index has soared by 108%.
The reason why the market has reinvested in cultured diamonds is that diamonds are shifting from consumer ornaments to AI infrastructure.
With the development of AI computing power, the heat dissipation requirements for chips are becoming increasingly high, and traditional heat-conducting materials can no longer meet the demand. Diamond is currently the substance with the highest known thermal conductivity, making it the ultimate solution for AI chip heat dissipation. NVIDIA has announced that its next-generation GPU chips will fully adopt a new heat dissipation solution of "diamond composite material + liquid cooling".
Once it transforms from an "ornament around the neck" to a "necessity for chips", the market size of cultured diamonds nearly doubles, and the average customer price increases by 5 - 30 times.
The development dividend of the industry is certain. However, the publicly available technological path and the industry characteristic of "quality highly dependent on upstream equipment" determine that it is difficult to form an absolute monopoly in terms of supply. This may be its investment shortcoming compared to upstream AI raw materials such as ABF films.
01
Cultured Diamonds Are Hot Again
Previously, cultured diamonds were a low-end manufacturing industry disguised as luxury goods.
Although cultured diamonds tried to follow the old path of natural diamonds by using the concept of love to increase their value. Compared with natural diamonds, through artificial production methods, the production time of a one-carat diamond has been shortened from 100 million years to one week, with fewer impurities and higher purity.
When diamonds can be produced on a large scale and industrially, the aura and meaning of "scarcity" attached to diamonds will inevitably fade. Once the scarcity is lost, cultured diamonds have fallen into the trap of the low-end manufacturing industry: low technical barriers, product homogenization, overcapacity, and ultimately, a vicious price war.
This low-end manufacturing attribute has also written the script for the development of cultured diamonds in the past few years.
In 2021, relying on cost advantages, cultured diamonds gradually replaced natural diamonds in the market narrative. At that time, their selling price was one-third of that of natural diamonds, meeting the psychological need of price-sensitive consumers to achieve "carat freedom". The market demand was strong, and enterprises made a lot of money.
Taking LiLiang Diamond as an example, its revenue increased by 100% year-on-year, and the net profit increased by as much as 228%. Among them, the gross profit margin of the cultured diamond business was as high as 81%. The capital market was also very enthusiastic. On the first day of its listing, LiLiang Diamond's stock price soared by more than 11 times. Huanghe Whirlwind and Zhongbing Hongjian also had annual increases of 209% and 166% respectively.
However, low barriers and homogenization often lead to overcapacity after collective expansion by enterprises. In the following years, cultured diamond enterprises collectively faced inventory backlogs. For example, according to Choice data, in 2024, LiLiang Diamond's inventory scale was 3.24 times that of 2021, and the proportion of inventory to revenue increased from 25% to 60%.
The result of overcapacity is a price war. The price of a one-carat cultured diamond at the terminal has dropped from a maximum of 30,000 yuan to 3,500 yuan in 2025, a decline of nearly 90%.
Enterprise performance has been seriously affected. In 2024, LiLiang Diamond's non-recurring net profit decreased by 55% year-on-year, and both Huanghe Whirlwind and Zhongbing Hongjian fell into losses. The stock prices also declined accordingly. In 2024, LiLiang Diamond's stock price had evaporated by nearly 80% compared to 2022.
However, enterprise losses are often accompanied by capacity clearance. In the past two years, more than 30% of the inefficient capacity of cultured diamonds has been cleared, and the supply-demand relationship has improved. In the first quarter of 2026, the price of gem-grade cultured diamonds has rebounded from 1,800 yuan per carat to 2,500 yuan per carat.
Reflected in enterprise performance, enterprises such as Huifeng Diamond, Huanghe Whirlwind, and LiLiang Diamond all achieved year-on-year increases in revenue and profit in the first quarter of 2026. Among them, LiLiang Diamond achieved revenue of 184 million yuan in the first quarter of 2026, a year-on-year increase of 55.85%; the net profit attributable to the parent company was 35.9756 million yuan, a year-on-year increase of 147.10%.
After the performance rebounded, the cultured diamond index in the capital market showed an upward curve, with an increase of more than 106%. Among individual stocks, Sifangda's increase exceeded 200%, and the increases of Huifeng Diamond, LiLiang Diamond, and Huanghe Whirlwind all exceeded 100%, while the increase of Wald reached 90%.
Generally, traditional manufacturing industries that improve performance through capacity contraction are unlikely to achieve such a large increase in the short term. The high increase of cultured diamonds is because AI is changing the value ceiling of cultured diamonds.
02
From Ornament to AI Infrastructure
As a barometer of AI, every move of NVIDIA can drive up the prices of AI-related stocks.
For example, a few days ago, Jensen Huang predicted that after computing power and storage, "optical interconnection" will become the new core of AI infrastructure worth trillions of dollars. He also publicly declared that NVIDIA's optical interconnection partner, Marvell, will be "the next trillion-dollar company". After the announcement, Marvell's stock price soared by 32% in a single day, setting a record high.
Similar to optical interconnection, cultured diamonds are also an AI infrastructure item driven by NVIDIA. In February this year, NVIDIA announced that its next-generation GPU chips will fully adopt a new heat dissipation solution of "diamond composite material + liquid cooling".
The diamond composite material here is actually cultured diamonds. The reason why cultured diamonds can become the next-generation AI material is that with the development of AI computing power, the power consumption of the most advanced AI processors has exceeded 2,000 watts per chip. Traditional heat dissipation materials such as copper and silicon can no longer handle such high power consumption. If the heat is not dissipated in time, the rapid increase in chip temperature will directly affect performance and reliability.
With its extremely high thermal conductivity, diamond has become the new generation of heat-conducting material for AI. China Galaxy Securities believes that in scenarios where the power consumption of a single chip exceeds 1,400 watts, diamond is a must-have option.
This transformation has also changed the value of cultured diamonds from ornaments to AI infrastructure.
First of all, the market scale is expanding. Although the application of cultured diamonds as a heat dissipation material is still in its infancy. Kaiyuan Securities estimates that by 2030, the market scale of diamond heat dissipation materials in the field of AI chips is expected to reach 48 billion to 90 billion yuan. In comparison, the market scale of cultured diamond jewelry in 2023 was 120 billion yuan. In the next four years, the incremental space brought by the heat dissipation scenario of cultured diamonds is equivalent to creating another market for cultured diamonds.
For enterprises capable of mass production, their revenue scale will be further increased. Currently, domestic enterprises have taken actions. It is reported that Wald has developed various specifications of CVD diamond single/multi-crystal heat sinks; LiLiang Diamond has also contacted multiple technology companies for sample delivery, R & D, and testing of heat dissipation materials; Huifeng Diamond plans to invest 1 billion yuan in the production of products such as CVD diamond heat sinks.
In addition to the nearly doubled market scale, diamond heat sinks also have a higher average customer price and profitability than cultured diamond jewelry.
When used for heat dissipation of high-power chips (such as AI GPUs, optical communications, and high-frequency radars), any tiny lattice dislocation or one-millionth of nitrogen impurities will cause a cliff-like drop in thermal conductivity. Therefore, diamond heat sinks require a more extreme level of "physical purity" than diamond jewelry.
With higher production difficulty and more critical application scenarios, the unit price of AI heat dissipation-grade diamond chips per carat is 5 - 30 times that of jewelry-grade cultured diamonds.
So, how should we view the value of cultured diamonds in the future?
03
Is It a Worthy Next Key AI Material to Bet On?
The investment logic of AI has extended from core hardware such as GPUs and storage to upstream raw materials. For example, since the beginning of this year, MLCC and ABF films have had relatively high increases in the capital market.
Among them, the MLCC index has increased by 102% since the beginning of this year. The leading company in the ABF film industry, Ajinomoto, has achieved a five-fold increase in five years. So, is cultured diamond a worthy next key AI material to bet on?
Looking at the ABF film, which has received long-term investment, the investment value of upstream raw material sectors with characteristics such as occupying key links, scarce supply, and an oligopoly pattern is the most certain.
Taking Ajinomoto as an example, it occupies the most critical insulating material in high-end AI chip packaging. Without it to separate the dense copper wire circuits inside, the current may interfere with each other or even cause a short circuit, and even the most advanced chips will be just a non-functional silicon wafer.
However, in such a critical link, the supply cannot keep up with the demand. On the demand side, the consumption of ABF by an AI GPU may be several times or even more than ten times that of a traditional CPU. On the supply side, Ajinomoto has long occupied more than 95% of the market share in the ABF field. It usually takes more than two years from the construction of a new ABF production line to stable mass production.
This combination of an oligopoly leader and scarce supply allows enterprises to enjoy the benefits of price increases during the upward cycle of the industry. For example, on May 11th, after Ajinomoto announced a 30% price increase for ABF materials. Even when the industry enters a stable period in the future, enterprises don't have to worry about price competition caused by overcapacity.
From this perspective, the story of cultured diamonds is only half good.
Although cultured diamonds also occupy a key link, such as AI heat dissipation is a necessary and rigid function. If the chips do not dissipate heat well, it will affect chip performance. At the same time, due to low yield rates and technological upgrades, cultured diamond heat sinks also face problems of capacity ramping up and insufficient supply.
However, the scarcity of supply is ultimately a temporary problem. In the long run, the value of cultured diamond heat sinks depends more on the final competitive landscape.
Different from Ajinomoto's monopoly of 95% of the ABF supply, there are currently many players in the cultured diamond heat sink market. Foreign suppliers include Element Six under De Beers and Sumitomo Electric, etc. Domestic leading enterprises such as LiLiang Diamond and Huanghe Whirlwind are almost all deploying in the field of cultured diamond heat sinks.
The difference in the competitive landscape is largely due to different underlying technologies.
ABF film is a polymer resin formula with excellent insulation and low-loss characteristics that Ajinomoto accidentally developed while researching monosodium glutamate by-products. This "chemical formula + synthesis process" belongs to a soft science barrier. Due to the strong exclusivity and patent protection of the chemical molecular structure, additive ratio, and curing agent formulation, even if others know the ingredients, they cannot formulate the same physical properties, which directly "locks out" latecomers in terms of the formula.
The underlying technology of cultured diamonds is MPCVD (Microwave Plasma Chemical Vapor Deposition). This is a hard physical process. The basic principle is completely public in the scientific community, and the basic structure of the equipment is also transparent. Since the principle is public, as long as there is enough capital to buy equipment and hire a technical team, many enterprises originally engaged in industrial diamonds or cultured diamonds can enter the market, so it is impossible to form an absolute monopoly in terms of supply.
During the current upward period of the AI industry, the performance of cultured diamonds will naturally have a large room for improvement.
However, whether the good development trend can continue in the future depends on the final supply pattern.
This article is from the WeChat official account "Read and Understand Finance", author: Gou Chunran, editor: Yang Yang. Republished by 36Kr with permission.