Finance
Analysis-Global investors turn to Chinese AI as Wall Street fears bubble
Published by Global Banking & Finance Review®
Posted on December 23, 2025
4 min readLast updated: January 20, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on December 23, 2025
4 min readLast updated: January 20, 2026
Global investors are turning to Chinese AI firms amid fears of a bubble in U.S. AI stocks, driven by China's tech independence push.
By Jiaxing Li and Laura Matthews
HONG KONG/NEW YORK, Dec 23 (Reuters) - 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 Threads, dubbed 'China's Nvidia', and MetaX, 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 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 currently trades at 31 times earnings, compared with a multiple of 24 for Hong Kong's Hang Seng Tech, which enables AI bets via stocks including Alibaba, Baidu, Tencent 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 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 and Advanced Micro-Fabrication Equipment, 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 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 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.
(Reporting by Samuel Shen in Shanghai, Jiaxing Li in Hong Kong and Laura Matthews in New York; Editing by Sumeet Chatterjee and Sonali Paul)
Artificial intelligence (AI) refers to the simulation of human intelligence in machines programmed to think and learn. AI can perform tasks such as problem-solving, speech recognition, and decision-making.
Chipmakers are companies that design and manufacture semiconductor chips used in various electronic devices. They play a crucial role in the technology sector, enabling advancements in computing and AI.
A speculative bubble occurs when the prices of assets rise significantly over their intrinsic value, driven by investor behavior rather than fundamental value. This often leads to a rapid price drop when the bubble bursts.
Geographical diversification is an investment strategy that involves spreading investments across different regions or countries to reduce risk. This approach helps investors mitigate losses from economic downturns in any single area.
Valuations in finance refer to the process of determining the current worth of an asset or a company. This can involve various methods, including comparing financial metrics and market conditions.
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