China AI Stocks Overlooked in Traders’ Search for Rulers
Since ChatGPT’s launch two years ago, the Nasdaq 100 surged 78%, while China AI stocks of Hang Seng Tech Index grew just 16%, highlighting disparities in AI sector growth between the US and China.
AI China stocks struggle with slower digital transformation, limited access to advanced chips, and a weaker startup ecosystem compounded by intense competition and insufficient enterprise software, hampering China’s ability to match US progress.
“The demand for AI is not going to explode overnight in China’s cloud computing market like what happened in the US,” said Martin Lau, president of Tencent Holdings.
Domestic and Global Competition
Slowly developed digitalization and a supply bottleneck for advanced chips have harnessed the growth of the China AI stock sector.
“China doesn’t have all that startup ecosystem and an enterprise software industry that drives artificial intelligence in the US,” said Richard Clode, a London-based manager for Janus Henderson’s Global Technology Leaders Fund, “the new trend is just not as powerful in China as in some other parts of the world,” he added.
US companies like Nvidia dominate in AI, while Chinese giants Tencent, Alibaba, and Baidu grapple with weak consumer demand and stiff competition, limiting gains from AI-powered business operations.
Baidu and Alibaba reported single-digit cloud revenue growth of 11% and 7% in the last quarter, lagging behind Microsoft’s Azure 30% and Amazon Web Services’ (AWS) 20% growth in the same period.
Price Wars and Investor Sentiment
China’s AI tech firms face hurdles to monetize their innovations, with price wars in the cloud sector and lukewarm customer interest hindering revenue growth from some of the best China AI stocks. Baidu’s AI-powered search tools demonstrate these struggles as they bush boosting for advertising sales, underscoring the difficulties in monetizing AI technologies.
Despite advancements in large language models and chip availability, China’s AI market fundamentals differ significantly from the US.
“Although investors may speculate on Chinese AI firms based on their US counterparts, the markets are fundamentally different,” warned Daisy Li, a fund manager at EFG Asset Management.
Value of China AI Stocks
China’s technology sector struggle accentuates a widening gap between the nations leading in adoption of AI and countries lagging. Without stronger domestic demand, extensive access to advanced technologies, and improved monetization strategies, China risks falling further behind.
This accentuates the need to build up innovation systems and to break down geopolitical constraints in order to stay relevant in the globalized world that is becoming more AI-centric in order to know what China AI stocks to buy and invest in.
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