Top Fund Giant: Chinese AI Giants Have More Investment Value Than Their American Counterparts

``` A new emerging market fund that has outperformed 97% of its peers is increasing its bets on China’s AI sector, wagering that the valuation advantages and application potential of Chinese internet giants like Tencent and Alibaba will surpass the cash-burning expansion of US tech giants. According to a Bloomberg report on Friday, Caroline Cai, CEO of Pzena Investment Management, said that her $3.9 billion fund has recently continued to increase holdings in Tencent Holdings and Alibaba Group. She believes that these companies are undervalued and have huge potential to deeply embed AI into existing platforms and change everyday life, with considerable upside. “The price you pay for the possibility of AI boosting productivity curves isn’t high,” she said in an interview. On AI investment value, Cai’s view contrasts sharply with the prevailing market sentiment. In recent months, investors have continued to sell off Tencent and Alibaba due to concerns about increasing competition in platform businesses, with some capital shifting to new AI startups like MiniMax. Valuation Gap: The Relative Advantage of Chinese Internet Companies Cai’s core logic lies in the significant valuation difference between Chinese and US AI companies. Chinese internet companies are generally valued lower than most US mega-scale cloud computing enterprises, while their AI application potential is not proportionately reflected. In terms of capital expenditure strategy, tech companies in China and the US take completely different paths. The four major US tech giants are expected to spend a total of about $650 billion in capital expenditures by 2026, mainly on new data centers and related equipment. In contrast, the scale of investment by Chinese internet companies is more restrained—according to Bloomberg Industry Research, the cumulative capital expenditures of major internet companies such as Alibaba, Tencent, Baidu, JD.com, and Meituan will exceed $240 billion by 2030. At present, these companies collectively hold $224 billion in cash reserves, providing a certain margin of safety. Cai believes that the key is not how much is spent, but where the money goes. “When you examine the quality of these models and the degree of focus on the application layer, this may be a more interesting way of monetizing AI than in developed countries,” she said. Portfolio Adjustment Logic: From Chips to Platforms To build new positions in Alibaba and Tencent, Pzena’s Emerging Markets Value Fund has reduced its holdings in Samsung Electronics and TSMC. Cai said these two companies are now less attractive to the fund. As for Samsung, Cai pointed out that with AI-driven demand pushing up memory chip prices, the investment thesis for the fund has already played out and exceeded expectations. This means the room for further valuation recovery has greatly narrowed and the cost-effectiveness of continuing to hold has declined. Currently, the top ten holdings of the Pzena Emerging Markets Value Fund still include Samsung Electronics, TSMC, and Alibaba. According to Bloomberg data, the fund has outperformed 97% of its peers over the past five years and also surpassed 90% of similar products so far this year. Cai acts as co-portfolio manager for all products under Pzena, managing around $67 billion in assets. Although Cai remains optimistic about China’s AI sector, she also acknowledges that it is difficult to predict the final winners and losers at this stage. Her strategy is based on this uncertainty—buying companies with transformation potential at a low price when the landscape is still unclear, diversifying bets. “In the early stages, when it’s still hard to predict who will win, such a strategy should pay off,” she said. Risk Warning and Disclaimer The market has risks; investment requires caution. This article does not constitute personal investment advice, nor does it consider the special investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular circumstances. Investing based on this information is at your own risk. ```