Key facts
- Goldman Sachs strategists believe the AI trade is splitting into two distinct global ecosystems.
- One ecosystem is centered on the US and its key trading partners, while the other is taking shape in China.
- China is developing advanced chips, open-weight large language models, and AI applications that could compete with the US-led ecosystem.
- The technology gaps between China and the West in AI appear to be narrowing.
- Goldman Sachs categorizes Chinese AI stocks into exporters tied to Western spending and domestic companies benefiting from China's AI investment.
- Chinese AI exporters saw a 126% gain from early 2025 to June 2026 before a 23% decline.
Goldman Sachs strategists are advising investors to reconsider the AI trade, as the market appears to be bifurcating into two distinct ecosystems, one centered around the US and its allies, and the other in China. This division is driven by geopolitical considerations, national security concerns, and differing growth trajectories.
The bank highlighted advancements by Chinese firms like DeepSeek and Kimi in large language models, as well as progress in semiconductor packaging, computing, biological engineering, and aerospace. Goldman Sachs noted that China is evolving from a mere supplier in the global AI infrastructure to a developer of its own competitive AI ecosystem, encompassing advanced chips, open-weight large language models, and AI applications.
According to the strategists, the technological disparities between China and the West in AI are diminishing. While China may still lag in leading-edge semiconductors, it is considered on par with or even ahead of global competitors in certain aspects of AI power, infrastructure, models, and physical AI applications.
This evolving landscape has led Goldman Sachs to reframe its AI investment strategy. Instead of viewing AI as a singular global theme, the firm now categorizes Chinese AI stocks into two segments: those exporting to Western markets and those focused domestically, benefiting from China's internal AI investments, adoption, and policy support. The performance of these two groups has diverged, with Chinese AI exporters experiencing significant gains followed by a correction, while domestic companies have shown more resilience.