China's AI stocks lure investors as gap with US widens

Investorideas.com (www.investorideas.com Newswire) a go-to platform for big investing ideas, including tech stocks issues market commentary from deVere Group.

With valuations lagging the US, investors are starting to pay attention again.

deVere Group Chief Executive Nigel Green says a powerful rally in China’s tech sector is drawing renewed global interest as investors look for the next major artificial intelligence opportunity outside the United States.

“The Hang Seng Tech Index has leapt more than 40% this year, outpacing the Nasdaq 100 and heading for a seventh consecutive week of gains,” says Nigel Green.

“It’s trading nearly 20 times forward earnings—well below its own five-year average and far beneath the Nasdaq’s 27 times.

“This valuation gap is too large to overlook when you consider the extraordinary innovation now underway in China.”

Today the index surged more than 4%, reaching its highest level since late 2021, powered by big moves in Baidu, Alibaba, Semiconductor Manufacturing International and JD.com. Baidu alone jumped 16% after an analyst upgrade highlighted the growth potential of its in-house chip business.

“China’s leading tech firms are showing they can commercialise AI faster than many market participants thought possible,” notes the deVere CEO.

“We’re seeing rapid deployment of next-generation models, autonomous driving technology and proprietary semiconductors—initiatives that are already generating revenue and scaling aggressively.”

He adds that easing tensions between Washington and Beijing are amplifying the appeal.

“Constructive dialogue between the world’s two largest economies is reducing one of the key risk premiums that has weighed on Chinese equities.

 As the diplomatic environment improves, capital that had been sitting on the sidelines is flowing back.”

The rally also reflects the comparative overheating of US AI names. “Some American peers trade at eye-watering multiples—Oracle at 43 times earnings, its highest since the dot-com era.

“Investors are rightly questioning how long those valuations can be justified,” says the deVere Group chief executive.

Beyond valuations, he points to structural drivers inside China. “Policy support from Beijing remains strong.

“The government has made AI a national priority, investing heavily in data infrastructure and advanced computing. This commitment provides both capital and confidence to entrepreneurs and public-market investors alike.”

China’s domestic economy is also stabilising after a challenging two years. Industrial profits are recovering, retail spending is firming, and the renminbi has steadied after last year’s turbulence.

“Stronger domestic demand creates a virtuous cycle for technology firms,” Nigel Green explains. “A healthier consumer base adopts new platforms more quickly, and that speeds up monetisation.”

He highlights the competitive advantage of China’s immense data ecosystem. “The sheer scale of China’s digital population provides unmatched training grounds for AI models. Companies can iterate and refine algorithms at a speed and scale that is difficult to replicate elsewhere.”

Global investors are taking notice. Cross-border flows into Hong Kong equities have picked up sharply since the start of the summer, and international funds are increasing allocations to mainland-listed tech leaders through Stock Connect.

“We’re seeing a clear re-rating in sentiment,” he notes. “Institutional money is not just testing the water—it’s beginning to commit.”

He cautions that investors must still manage risks, from regulatory shifts to lingering trade frictions. But he argues that the market has already priced in much of that uncertainty. “Valuations remain attractive even after the recent rally.

"The discount to US peers offers a significant cushion against potential policy surprises.”

Looking ahead, Nigel Green believes the momentum will persist.

“The combination of strong earnings growth, government backing, and improving global relationships sets the stage for further gains. As AI adoption accelerates worldwide, China’s capacity to commercialise and scale will keep drawing capital.”

For deVere clients, he says, the opportunity is twofold: “You gain exposure to the world’s second-largest economy and its world-class innovators at a time when valuations in the US look stretched.

“That’s a compelling strategic allocation for investors seeking growth with a margin of safety.”

Nigel Green concludes: “This is not a fleeting bounce. It is a structural re-rating of a sector that was left behind while US AI fever dominated headlines. Global investors who continue to ignore the opportunity in China’s AI leaders risk missing one of the most significant tech investment stories of this cycle.”

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