Chinese tech stocks "soar": Driven by accelerated AI, the Hang Seng Tech Index has significantly outperformed the Nasdaq this year.

```

Driven by the AI narrative, Chinese tech stocks have left their American counterparts far behind this year.

Since the beginning of this year, the Hang Seng Tech Index has soared by 41%, far surpassing the 17% increase of the Nasdaq Index over the same period.

This rally, which began at the start of the year with DeepSeek’s AI breakthrough, accelerated further in September.

“The entire narrative around Chinese AI has completely changed,” said Winnie Wu, Chief China Equity Strategist at BofA Global Research:

“It feels like China is making a breakthrough at the very crucial bottleneck of AI computing power.”

Breakthroughs in AI Large Models Mark a Key Turning Point

“Animal spirits are back,” said Albert Kwok, Emerging Markets Equity Portfolio Manager at PGIM Jennison Associates. He noted that the emergence of DeepSeek in February was a “critical moment” that changed everything.

In addition, AI large models such as Alibaba’s “Qwen,” Tencent’s “Yuanbao,” and Baidu’s “Ernie X1.1” have received praise from analysts and ranked among the top in industry benchmark tests.

These advances have fueled market hopes for broad commercial adoption and productivity improvements through AI technology in China. Further, progress by companies like Baidu in developing advanced in-house chips, as well as increased investment in AI infrastructure, has also supported this rally.

Since the start of the year, the share prices of Alibaba, Tencent, and Baidu have risen by 96%, 55%, and 59%, respectively, with Alibaba and Baidu surging 31% and 48% just in the past month. “This is the fourth industrial revolution,” said Bush Chu, China Equity Portfolio Manager at abrdn:

“We are witnessing AI fundamentally change the way people work and interact with machines—and even with society itself.”

Inflows of Overseas Capital

This optimism is not limited to major technology companies, but also extends to chip makers like Cambricon and biotech companies. So far this year, the CSI AI Index has delivered a return of over 61%, while the Hang Seng Biotech Index has surged by 98%.

At first, the main buyers in this round of AI stocks were mainland Chinese investors. But as technological progress has become more apparent and valuations remain relatively cheap, global investors have started to take a renewed interest as well. “Foreign investors are coming back and rebuilding exposure to China,” said Jack Siu, Chief Investment Officer for Greater China at Lombard Odier. Albert Saporta, CEO of GAM Holding Group, also noted:

“Chasing momentum is a global disease. Being underweight Chinese tech stocks will be painful.”

Risk Disclosure and DisclaimerThe market carries risks, so investment should be approached with caution. This article does not constitute personal investment advice and has not taken into account the individual investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions expressed in this article suit their specific situation. Investments made accordingly are at your own risk. ```