In 2025, China’s tech sector has surged by $439 billion, significantly outperforming US counterparts, with major Chinese firms like Alibaba and Tencent gaining over 40%. The Hang Seng Tech Index is rising while US tech stocks struggle due to high valuations and geopolitical uncertainties. Optimism in China’s market is driven by government support and advancements in AI, indicating a potential investment shift towards China.

In 2025, China’s technology sector has experienced significant growth, rallying by $439 billion, which positions its major companies ahead of their US counterparts. Investors observe that this momentum shows potential for further growth. A basket comprised of China’s seven major technology firms, including Alibaba and Tencent, has surged over 40% this year. In stark contrast, an index tracking the US Magnificent Seven has witnessed a decline of nearly 10%, exacerbating a near-correction in the Nasdaq 100 Index, as reported by News.Az citing Bloomberg.

This dramatic shift was largely unforeseen by Wall Street analysts. Earlier in the year, while the Nasdaq reached record highs, Chinese firms were still recovering from regulatory pressures and weak consumption. The surprise surge was stimulated by DeepSeek’s advancements, challenging the notion that China would take years to bridge the AI gap with the United States. As a result, optimism around Chinese tech stocks has increased, bolstered by Beijing’s commitment to support the sector and recent AI innovations from firms like Alibaba.

Charu Chanana, chief investment strategist at Saxo Markets, acknowledged the significance of these developments, stating: “The DeepSeek success, followed by a suite of AI models from China, has reminded the world that China’s innovation prowess should not be underestimated despite the chip export restrictions from the US.” This competitive landscape has led to the current valuations of China’s tech firms trading at substantial discounts—over 40% lower than their US peers, as noted by Societe Generale.

As a result, the Hang Seng Tech Index has seen a 10% increase this week alone and trades at its highest since late 2021. Meanwhile, US equities are facing multiple challenges. The overarching belief in the unyielding nature of the US equity rally is being tested amid changing trade dynamics under President Donald Trump, which has unsettled both businesses and consumers.

Moreover, the prolonged uptrend of US tech stocks, especially those led by Nvidia, has encountered obstacles as investors reevaluate their lofty valuations. While there is a sense of optimism surrounding Chinese stocks, investor caution remains due to China’s historical poor market performance and rising geopolitical tensions under Trump’s administration.

Despite the rally, the Hang Seng Tech Index is still approximately 40% below its peak from 2021, and its five-year returns remain significantly lower than the Nasdaq 100’s impressive 130% gain. However, increasing concerns regarding US stock valuations have made China a compelling alternative for numerous investors. “The necessary drivers are there for China tech to outperform, including top level government support, recovering earnings, and structural growth theme in AI,” observed Vey-Sern Ling from Union Bancaire Privee. He further noted that earnings disappointments in the US are contributing to a shift of investment focus towards China and Europe.

In conclusion, China’s technology sector is currently experiencing remarkable growth, considerably outperforming US tech stocks amidst changing market dynamics. Investors are showing renewed confidence in Chinese firms, encouraged by substantial government support and advancements in AI technology. This scenario suggests a potential shift in investment strategies as market observers closely monitor the unfolding developments in both regions.

Original Source: news.az

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