HONG KONG/NEW YORK, Dec 23 (Reuters) – Global investors are increasing their bets on Chinese artificial intelligence companies, betting on the next DeepSeek and looking to diversify, as concerns grow about a speculative bubble in the sector on Wall Street.
Demand for China’s AI companies is also being boosted by Beijing’s push for technological independence. China has fast-growing lists of chipmakers, notably Moore Threads ( 688795.SS ), dubbed the “Nvidia of China” and MetaX ( 688802.SS ), both of which debuted this month.
Foreigners see China closing the technology gap with the US as Beijing ramps up its support for AI chipmakers, boosting bets on Chinese companies as worries grow over high valuations of US-listed AI stocks.
UK asset manager Ruffer, for example, said it had “deliberately limited exposure” to the Magnificent Seven – the US tech giants – and was looking to add positions in Alibaba ( BABA, 9988.HK ) for greater exposure to China’s AI theme.
“While the US remains the leader in frontier AI, China is rapidly closing the gap,” said Gemma Cairns-Smith, investment specialist at Ruffer. “The moat may not be as wide, or as deep, as many believe… The competitive landscape is changing.”
Alibaba’s Quark AI Glasses in a Shanghai store. (CFOTO/Future Publishing via Getty Images) ·CFOTO via Getty Images
Ruffer is gaining exposure to AI through Chinese tech giants like Alibaba, which operates an AI chip unit, owns a large language model Qwen, and invests money in cloud infrastructure.
Global asset managers are increasingly eyeing Chinese artificial intelligence firms as a wave of startup listings on the mainland and in Hong Kong, seeking to tap growing investor appetite after the meteoric rise of DeepSeek, China’s answer to ChatGPT.
TECH WAR DRIVES DEMAND
UBS Global Wealth Management, in a report this month, rated China’s technology as “most attractive”, citing investors’ search for geographic diversification and China’s “strong policy support, technological self-confidence and rapid monetization of AI”.
Nasdaq ( ^IXIC ) currently trades at 31 times earnings, compared with a multiple of 24 for Hong Kong’s Hang Seng Tech ( HSTECH.HK ), which enables AI bets through stocks including Alibaba ( BABA , 9988.HK ), Baidu ( BIDU , 9888.HK ), Tencent ( 0700.HK ) and CHIPRY Foundry, SHY. (0981.HK).
Following that momentum, US 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 rise of Chinese AI chipmakers such as Cambricon speaks to the scale and speed of innovation in China’s AI and semiconductor industries.
“The element of this race narrative, this urgency, is for the benefit of companies,” he said, referring to the bitter Sino-American tech war.
“It’s like yelling fire, right? When you make it an emergency, you get a lot of attention.”
KraneShares’ exchange-traded fund, called KWEB ( KWEB ), which invests in offshore-listed Chinese stocks including Tencent, Alibaba and Baidu, has risen 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, also rose this year.
In the AI race, the US has an edge in innovation, while China has advantages in engineering, manufacturing and power 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 betting on Chinese stocks with transformative technologies, including Cambricon.
U.S. technological limits “have now forced China to put money into hard technology and invent from scratch,” Hsu said. “For investors, the prudent and wise strategy is to capture AI opportunities and manage uncertainty through diversification.”
Chinese AI chipmaker MetaX Integrated Circuits ( 688802.SS ), founded by former AMD executives, soared 700 percent in its Shanghai market debut last week, days after larger rival Moore Threads ( 688795.SS ) debuted with a 400 percent pop.
However, some global fund managers say China’s technological potential and foreign flows remain limited.
“None of the chip companies that are currently listed 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 such as Alibaba and Baidu, which have both invested far less than the US players in AI development.
Carol Fong, group CEO of CGS International Securities, said investors should selectively add companies that have benefited from China’s “self-confidence” boost in the AI and semiconductor sectors, while keeping global leaders in their portfolio.
There is a hunt for “potential leaders in high-tech segments such as robotics and artificial intelligence, where they see clearer policy directions and relative value compared to Western counterparts,” Fong said, expecting more flows in the future.
Investors should “balance exposure in the current fragmented, geopolitically driven cycle,” she said.
(Reporting by Samuel Shen in Shanghai, Jiaxing Li in Hong Kong and Laura Matthews in New York; Editing by Sumeet Chatterjee and Sonali Paul)
