(Bloomberg) — A $439 billion rally in Chinese tech megacaps this year has left their once-unbeatable US peers in the dust, an outperformance that many investors say has room to extend.
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An equal-weighted basket of China’s seven tech heavyweights including Alibaba Group Holding Ltd. (BABA, 9988.HK) and Tencent Holdings Ltd.(TCEHY, 0700.HK) — dubbed the “7 titans” by Societe Generale SA — has gained more than 40% this year. That compares with an about 10% drop in an index of the Magnificent Seven stocks, whose slump has also pushed the Nasdaq 100 Index (^NDX) to the brink of a correction.
It’s a sharp reversal of fortunes that few in Wall Street saw coming. Earlier in 2025, the Nasdaq gauge had notched yet another record, while Chinese stocks were still marred by years of regulatory crackdown and a tepid consumption recovery. Then almost overnight, DeepSeek upended the perception that it will take years — if ever — for China to catch up to the level of America’s AI supremacy.
Chinese tech stocks have been on a tear since then, prompting even long-time skeptics to turn optimistic. The rally received another push this week following Beijing’s plan to step up support for tech companies and a spate of new AI tools from the likes of Alibaba.
“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,” said Charu Chanana, chief investment strategist at Saxo Markets. “The momentum in the China AI plays has room to run, given the valuation discount.”
SocGen named the Chinese cohort, which also includes Xiaomi Corp. (XIACY, 81810.HK), BYD Co. (BYDDY, 1211.HK), Semiconductor Manufacturing International Corp. (0981.HK), JD.com Inc. (JD, 9618.HK) and NetEase Inc. (NTES, 9999.HK), based on their market cap and growth trajectory. The basket currently trades at 18 times forward earnings, a discount of more than 40% to the Magnificent Seven, according to a Feb. 28 note by strategists led by Frank Benzimra.
The Hang Seng Tech Index (HSTECH.HK) gained more than 1% on Friday, taking this week’s advance to about 10%. The gauge is trading its highest since late 2021.
US Vs China
While things appear to be coming together for Chinese equities — once deemed “uninvestable” — US stocks are suffering from a multiple whammy of hits.