Global investors shift bets to Chinese AI amid fears of Wall Street bubble

Global investors are increasing their wagers on Chinese artificial intelligence companies, betting on the next DeepSeek and seeking to diversify, with concerns growing about a speculative bubble in the sector on Wall Street.

 

Demand for China's AI companies is also being stimulated by Beijing's push for tech independence. China has fast-tracked blockbuster listings of chipmakers, notably Moore Thread, opens new tab, dubbed 'China's Nvidia', opens new tab, and MetaX, opens new tab, which both debuted this month.

 

Foreigners see China closing the tech gap with the U.S. as Beijing steps up support for AI chipmakers, spurring bets on Chinese companies just as worries grow over lofty valuations on U.S.-listed AI stocks.

 

 

U.K.-based asset manager Ruffer, for example, said it has "deliberately limited exposure" to the Magnificent Seven - the U.S. tech giants - and is looking to add positions in Alibaba, opens new tab for a bigger exposure to China's AI theme. 

 

"While the U.S. remains the leader in frontier AI, China is rapidly narrowing the gap," said Gemma Cairns-Smith, Investment Specialist at Ruffer. "The moat may not be as wide, or as deep, as many think ... The competitive landscape is shifting."

 

Ruffer is gaining exposure to the AI theme through Chinese tech giants such as Alibaba, which operates an AI chip unit, owns large language model Qwen, and is ploughing money into cloud infrastructure.

 

Global asset managers are increasingly eyeing Chinese AI firms as a wave of startups lists on the mainland and in Hong Kong, seeking to tap into surging investor appetite following the meteoric rise of DeepSeek, China’s answer to ChatGPT.

 

TECH WAR SPURS DEMAND

 

UBS Global Wealth Management in a report this month rated China tech as "most attractive", citing investors' search for geographical diversification and China's "strong policy backing, technological self-reliance, and rapid AI monetization".

 

The tech-heavy Nasdaq, opens new tab currently trades at 31 times earnings, compared with a multiple of 24 for Hong Kong's Hang Seng Tech, opens new tab, which enables AI bets via stocks including Alibaba, Baidu, opens new tab, Tencent, opens new tab and chip foundry SMIC. 

 

Riding the momentum, U.S. investment adviser Rayliant helped launch a Nasdaq-listed fund in September that gives investors access to "China's versions of stocks like Google, Meta, Tesla, Apple, and OpenAI".

 

KraneShares Chief Investment Officer Brendan Ahern said the rapid ascent of Chinese AI chipmakers such as Cambricon, opens new tab speaks to the scale and speed of innovation across China's AI and semiconductor industries.

 

"The element of this race narrative, this urgency, is to the benefit of the companies," he said, referring to the bitter Sino-U.S. tech war.

 

"It's like yelling fire, right? When you make it an emergency, you get a lot of attention."

 

KraneShares' exchange-traded fund dubbed KWEB , which invests in offshore-listed Chinese stocks including Tencent, Alibaba and Baidu, has jumped by two-thirds this year to nearly $9 billion.

 

Another KraneShares ETF that invests in China's onshore tech stocks , including chipmakers Cambricon, Montage Technology, opens new tab and Advanced Micro-Fabrication Equipment, opens new tab, has also grown this year.

 

In the AI race, the U.S. has an edge in innovation while China has advantages in engineering, manufacturing and power supply, said Jason Hsu, founder of U.S.-based Rayliant Global Advisors.

 

Rayliant has partnered with China Asset Management Co in launching a Nasdaq-listed ETF, opens new tab that bets on Chinese stocks with transformative technologies, including Cambricon.

 

U.S. tech curbs have "now forced China to pump money into hard technology and invent from scratch," said Hsu. "For investors, the prudent and wise strategy is to capture AI opportunities and manage uncertainty through diversification."

 

'DRIVEN BY HYPE'

 

Chinese AI chipmaker MetaX Integrated Circuits, founded by former AMD executives, jumped 700% in its Shanghai market debut last week, days after larger rival Moore Threads, opens new tab debuted with a 400% pop.

 

However, some global fund managers say China's tech potential and foreign inflows remain limited.

 

"None of the chip companies that are currently listed have any sort 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 such as Alibaba and Baidu, which have both invested much less than U.S. players on AI development.

 

Carol Fong, group CEO 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 hunt for "potential leaders in the high-tech segments such as robotics and AI, where they see clearer policy directions and relative value as compared to the Western counterparts," Fong said, expecting more flows ahead.

 

Investors should "balance exposure in the current fragmented, geopolitics-driven chip cycle," she said.