China’s tech sector has surged by $439 billion in 2025, overshadowing U.S. stocks which have fallen significantly. This change is attributed to advancements in AI and support from the Chinese government, while U.S. markets face mounting challenges, signaling a potential shift in investment trends from the U.S. to China.
In 2025, China’s technology sector experienced a remarkable rally, gaining $439 billion, which has allowed it to eclipse its American counterparts. An equal-weighted index of seven prominent Chinese tech companies, known as the “7 titans” by Societe Generale, has surged over 40%, contrasting sharply with a 10% decline in the U.S. index of the Magnificent Seven stocks. As a result, the Nasdaq 100 Index is nearing a correction, as indicated by reporting from News.Az.
This unexpected shift in fortunes surprised many on Wall Street, particularly as only months ago, the Nasdaq had achieved record highs while Chinese stocks struggled under regulatory scrutiny and sluggish domestic consumption. However, the perception has shifted rapidly with the advent of DeepSeek, which highlighted China’s progress toward closing the gap in artificial intelligence (AI) capabilities with the U.S.
Chinese tech stocks have gained significant momentum, encouraging even previous skeptics to adopt a more optimistic outlook. This trend was bolstered by the Chinese government’s recent efforts to enhance support for tech companies, alongside new AI advancements from corporations such as Alibaba. Charu Chanana, chief investment strategist at Saxo Markets, remarked on this turn of events by 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.”
The basket of Chinese tech companies, which includes Xiaomi, BYD Co., Semiconductor Manufacturing International Corp., JD.com, and NetEase, is trading at 18 times forward earnings, significantly lower than the Magnificent Seven’s valuation, according to strategists at Societe Generale. This week, the Hang Seng Tech Index rose over 1%, bringing its weekly advancement to approximately 10%, the highest level since late 2021.
In contrast, U.S. stocks are facing numerous challenges that are causing investor unease. The previously dominant narrative of U.S. equity resilience is being undermined as President Donald Trump’s policies have disrupted global trade relations, leading to broader anxieties among businesses and consumers alike. Additionally, the recent multi-year gains of U.S. tech stocks, particularly Nvidia, are being scrutinized for sustainability as investor expectations of high earnings continue to rise.
While there is newfound optimism surrounding Chinese stocks, investors remain cautious due to China’s prior history of disappointing market returns, unexpected policy changes, and escalating geopolitical tensions associated with Trump. Nevertheless, despite a 40% deficit from its 2021 peak, the Hang Seng Tech Index has posted a five-year return of approximately 18%, a stark contrast to the Nasdaq 100’s over 130% increase.
Finally, as concerns mount over inflated U.S. stock valuations, China is emerging as an alternative investment. Vey-Sern Ling, a managing director at Union Bancaire Privee, explained the situation, stating, “The necessary drivers are there for China tech to outperform, including top level government support, recovering earnings, and structural growth theme in AI,” suggesting a possible migration of investments from the U.S. to China and Europe due to disappointing earnings and macroeconomic factors affecting U.S. stocks.
In summary, the Chinese technology sector is experiencing a significant renaissance, outpacing U.S. counterparts and capturing investor interest amid a volatile environment in American markets. With support from the Chinese government and advancements in AI technologies, the potential for further growth remains robust. Meanwhile, U.S. tech stocks face scrutiny over valuations and economic uncertainties, leading to a possible shift in investor focus towards China as a promising alternative.
Original Source: news.az
