The Economic Times·2025-12-24 05:14Core Insights - Demand for Chinese AI firms is driven by Beijing's push for technological self-reliance and rapid listings of domestic chipmakers, indicating a strategic effort to close the technology gap with the U.S. [1][16] - Foreign investors are increasingly viewing China as a viable AI investment destination due to policy support for local chipmakers and software developers, coinciding with concerns over high valuations of U.S.-listed AI stocks [2][16] - Large Chinese technology companies like Alibaba, Baidu, and Tencent are benefiting from this shift, attracting investor interest due to their investments in AI chips and cloud infrastructure [3][16] Investment Trends - A wave of AI startups listing on mainland exchanges and in Hong Kong has strengthened investor appetite, highlighted by the rise of DeepSeek, which has reignited global interest in China's AI capabilities [4][5][16] - The Sino-U.S. technology rivalry is a central factor driving demand for Chinese AI assets, with strong policy backing and rapid AI monetization being key elements of renewed investor interest [7][16] - Valuation gaps between U.S. and Chinese tech stocks are influencing investment decisions, with Hong Kong's Hang Seng Tech Index offering cheaper access to Chinese AI leaders compared to the Nasdaq [8][16] Market Dynamics - New investment products, including exchange-traded funds focused on Chinese tech stocks, have seen strong inflows, reflecting rising confidence in the sector's long-term prospects [10][16] - China's AI and semiconductor industries are demonstrating rapid innovation, particularly in chip design and manufacturing, with competitive advantages in engineering scale and manufacturing efficiency [11][16] - U.S. technology restrictions have reshaped China's innovation strategy, prompting domestic firms to invest heavily in core technologies and develop alternatives [12][16] Cautionary Notes - Some fund managers caution that recent market moves may be ahead of fundamentals, with concerns that the sector may be driven more by hype than by valuation support [13][16] - Skeptics argue that many listed chip companies lack proven earnings visibility, making them vulnerable to corrections, leading some investors to prefer established firms with disciplined AI spending [14][16] - Market experts advise a selective approach, focusing on companies benefiting from China's self-reliance push in AI and semiconductors while maintaining exposure to global technology leaders [15][16]