Global investors are increasingly betting on Chinese artificial intelligence companies, seeking a new DeepSeek and diversification amid growing concerns about a speculative bubble in the sector on Wall Street.
Demand for Chinese AI companies is also driven by Beijing’s support for technological independence. China has accelerated the listing of chipmakers including Moore Threads, nicknamed “Chinese Nvidia”, and MetaX, which debuted this month.
Foreigners see China narrowing the technology gap with the United States as Beijing increases support for local AI chip makers, boosting bets on Chinese companies even as concerns over the U.S. bubble grow.
UK-based asset manager Ruffer, for example, said it had “deliberately limited exposure” to the seven largest US technology companies – and was looking to add positions in Alibaba as it sought greater exposure to China’s AI development.
“While the US continues to lead in cutting-edge AI, China is rapidly closing the gap,” said Gemma Cairns-Smith, investment expert at Ruffer. “The gap may not be as wide or as deep as many think…The competitive landscape is changing.”
Ruffer is expanding its exposure to the topic of AI through Chinese tech giants such as Alibaba, which owns the large language model Qwen and is investing in cloud computing infrastructure.
Global asset managers increasingly view Chinese AI companies as a wave of startups listed on the mainland and in Hong Kong, seeking to tap growing investor appetite following the meteoric rise of DeepSeek, China’s answer to ChatGPT.
TECHNOLOGY WAR STIMULATES DEMAND
In a report released this month, UBS Global Wealth Management called Chinese technology “the most attractive,” citing investors’ quest for geographic diversification and China’s “strong policy support, technological self-sufficiency and rapid monetization of AI.”
The Nasdaq currently trades at 31 times listed company earnings, compared to a multiple of 24 for Hong Kong’s Hang Seng Tech, which makes bets on AI through stocks such as Alibaba, Baidu, Tencent and SMIC.
Building on this momentum, US investment advisor Rayliant helped launch a Nasdaq-listed fund in September that gives investors access to “Chinese versions of stocks like Google, Meta, Tesla, Apple and OpenAI”.
KraneShares chief investment officer Brendan Ahern said the rapid rise of Chinese AI chipmakers such as Cambricon demonstrates the scale and speed of innovation in China’s AI and semiconductor sectors.
“The element of this racial discourse, this urgency, is good for business,” he said, referring to the tech war between the United States and China. “It’s like shouting fire, isn’t it? When you make it an emergency, you get a lot of attention.”
KraneShares’ exchange-traded fund called KWEB, which invests in overseas-listed Chinese stocks including Tencent, Alibaba and Baidu, has grown by two-thirds this year to nearly $9 billion.
Another KraneShares ETF that invests in onshore Chinese technology stocks, including chipmakers Cambricon, Montage Technology and Advanced Micro-Fabrication Equipment, has also seen growth this year.
In the AI race, the United States has an edge in innovation, while China has advantages in engineering, manufacturing and energy supply, said Jason Hsu, founder of U.S.-based Rayliant Global Advisors.
Rayliant has partnered with China Asset Management Co to launch a Nasdaq-listed ETF that bets on Chinese stocks with transformative technologies, including Cambricon.
U.S. technological constraints “have now forced China to invest money in heavy technology and invent from scratch,” Hsu said. “For investors, the prudent and wise strategy is to seize AI opportunities and manage uncertainty through diversification.”
“FOLDED BY HYPE”
Chinese AI chipmaker MetaX Integrated Circuits, founded by former AMD executives, surged 700% in its Shanghai market debut last week, days after its biggest rival Moore Threads debuted up 400%.
However, some global fund managers say China’s technological potential and foreign capital flows remain limited.
“None of the currently listed chip companies have any valuation support and are almost entirely driven by hype,” said Kamil Dimmich, partner and portfolio manager at UK-based North of South Capital.
Dimmich’s fund owns stocks like Alibaba and Baidu, which have invested far less than U.S. companies in AI development.
Carol Fong, chief executive of CGS International Securities Group, said investors should selectively add companies that have benefited from China’s “self-reliance” push in the AI and semiconductor sectors, while keeping global leaders in their portfolio.
There is a search for “potential leaders in high-tech segments such as robotics and AI, where they see clearer policy directions and relative value compared to their Western counterparts,” said Fong, who expects more capital inflows in the future.
Investors should “balance their exposure in the current fragmented and geopolitically driven chip cycle,” she said.
About The Author
