Key facts
- China's state-backed 'National Team' of investors is intervening in the AI stock market.
- The 'National Team' is reportedly selling holdings in AI companies to cool market sentiment.
- Chinese AI stocks are seen as undervalued compared to U.S. counterparts.
- China's 'Sovereign AI' strategy emphasizes domestic innovation and self-reliance.
- Beijing is reportedly adopting a more supportive stance towards its tech sector.
China has deployed a 'National Team' of state-linked investors to temper the rapid rise of artificial intelligence (AI) stocks, a move that could have significant implications for global markets. These state-linked funds have begun unloading holdings in the AI sector to cool overly optimistic market sentiment.
Key players in the AI sector include NVIDIA Corporation, known for its GPUs; Alphabet Inc., heavily invested in AI research; Microsoft Corporation, integrating AI across its products; Amazon.com, Inc., leveraging AI for its e-commerce and cloud services; Palantir Technologies Inc., specializing in data analytics; and Salesforce.com, Inc., integrating AI into its CRM solutions.
Meanwhile, investors are increasingly pivoting to Chinese AI giants such as Baidu and Alibaba, which are seen as significantly undervalued compared to their U.S. peers. This rotation is driven by a 'Great Valuation Divergence,' with Chinese companies offering 'Growth at a Reasonable Price' (GARP) opportunities. Baidu's Ernie Bot and Alibaba's Qwen models demonstrate successful integration and adoption of generative AI.
China's 'Sovereign AI' strategy is a cornerstone of its national policy, driving self-reliance in technology following U.S. export controls. Companies like Huawei and SMIC are advancing domestic semiconductor production, while Chinese AI models are leveraging local data environments. The Chinese government has also shifted towards a more supportive stance on its tech sector, offering subsidies and tax breaks, and providing a clearer regulatory framework.
Despite geopolitical risks, many fund managers believe these risks are already priced into Chinese stock valuations. The actions by China's National Team highlight the volatility accompanying rapid AI stock growth, urging investors to approach the sector with caution and monitor both Chinese market developments and the performance of key global AI players.