Global investors are increasing bets on Chinese artificial intelligence companies, seeking a new DeepSeek and diversification in the face of growing concerns about the existence of a speculative bubble in the sector on Wall Street.
Demand for China’s AI companies is also being boosted by Beijing’s support for technological independence. China has accelerated the listing of chipmakers, notably Moore Threads, dubbed the “Nvidia of China,” and MetaX, which debuted this month.
Foreigners see China closing the technology gap with the US as Beijing increases support for local AI chipmakers, while concerns about a bubble in the US grow.
UK-based asset manager Ruffer, for example, said it has “deliberately limited exposure” to the seven biggest US technology companies – and is looking to add positions in Alibaba as it seeks greater exposure to AI development in China.
“While the US continues to be the leader 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 exposure to the topic of AI through Chinese technology giants such as Alibaba, which owns the large language model Qwen and is investing in cloud computing infrastructure.
Global asset managers are increasingly eyeing Chinese AI companies as a wave of startups list on the mainland and in Hong Kong, seeking to tap into growing investor appetite following , China’s answer to ChatGPT.
Technological war stimulates demand
In a report this month, UBS Global Wealth Management called Chinese technology “most attractive,” citing investors’ quest for geographic diversification and China’s “strong political support, technological self-sufficiency and rapid monetization of AI.”
The Nasdaq currently trades at 31 times earnings of listed companies, compared with a multiple of 24 for Hong Kong’s Hang Seng Tech, which enables AI bets through stocks such as Alibaba, Baidu, Tencent and SMIC.
Building on the momentum, US investment adviser 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 race narrative, this urgency, is beneficial for companies,” he said, referring to the technology war between the US and China. “It’s like shouting fire, right? 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 increased by two-thirds this year to nearly $9 billion.
Another KraneShares ETF that invests in China’s onshore technology stocks, including chipmakers Cambricon, Montage Technology and Advanced Micro-Fabrication Equipment, has also grown this year.
In the AI race, the US has an advantage in innovation, while China has advantages in engineering, manufacturing and energy supply, said Jason Hsu, founder of US-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. technology restrictions have “now forced China to pump money into heavy technology and invent from scratch,” Hsu said. “For investors, the prudent and wise strategy is to capture AI opportunities and manage uncertainty through diversification.”
Hype
Chinese AI chipmaker MetaX Integrated Circuits, founded by former AMD executives, gave a , days after larger rival Moore Threads debuted with a 400% gain.
However, some global fund managers say China’s technological potential and foreign inflows remain limited.
“None of the currently listed chip companies have any kind of 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 developing AI.
Carol Fong, group chief executive of CGS International Securities, 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 Western counterparts,” said Fong, who expects more flows in the future.
Investors should “balance exposure in the current geopolitically driven and fragmented chip cycle,” she said.
