China’s tech sector has surged by $439 billion in 2025, contrasting a declining U.S. market. The ‘7 titans’ of Chinese tech experienced over a 40% gain, while the U.S. Magnificent Seven stocks fell by 10%. This shift has heightened investor interest in Chinese equities amid skepticism surrounding U.S. stock valuations.
In 2025, China’s technology sector has experienced a significant resurgence, gaining $439 billion, leaving its U.S. counterparts struggling. Investors express optimism about this momentum continuing. An equal-weighted portfolio of China’s seven major tech firms, termed the “7 titans” by Societe Generale, has surged over 40% this year, contrasting with a 10% decline in the U.S. index comprising the Magnificent Seven stocks, which contributed to the Nasdaq 100 Index nearing a correction, as reported by Bloomberg.
This shift in fortunes has taken Wall Street by surprise. Earlier in the year, the Nasdaq index had attained a record high, while Chinese equities faced obstacles from stringent regulations and slow consumer recovery. However, the rapid rise of DeepSeek altered perceptions, suggesting that China may narrow the gap with the United States in artificial intelligence capabilities sooner than anticipated.
After the DeepSeek success, optimism surrounding Chinese tech stocks has surged, bolstered by Beijing’s recent initiatives to support these companies and the introduction of new AI tools by firms like Alibaba. Charu Chanana, chief investment strategist at Saxo Markets, stated, “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 seven Chinese firms include Xiaomi Corp., BYD Co., Semiconductor Manufacturing International Corp., JD.com Inc., and NetEase Inc., recognized for their market capitalization and growth trajectories. Currently, this group is trading at 18 times forward earnings, offering over a 40% discount compared to the Magnificent Seven according to a note from strategists at Societe Generale.
The Hang Seng Tech Index witnessed a rise of more than 1% on a recent Friday, culminating in a 10% increase this week, marking its highest trading level since late 2021. While the situation appears favorable for Chinese stocks, which were once deemed “uninvestable,” the U.S. market is facing multiple challenges.
The overall confidence in the U.S. equity rally has been undermined by President Donald Trump’s actions impacting global trade and instilling anxiety among American businesses and consumers with multiple tariffs. Meanwhile, a sustained multi-year growth in U.S. tech stocks led by Nvidia Corp. faces scrutiny as investors reassess their valuations amidst a demand for more substantial earnings surprises.
Despite the renewed enthusiasm for China, concerns regarding long-term market returns, abrupt policy changes, and escalating geopolitical tensions under Trump are leaving some investors hesitant. The Hang Seng Tech Index still rests approximately 40% below its peak in 2021, with a five-year return of around 18%, which pales in comparison to the Nasdaq 100’s over 130% growth during the same timeframe.
Nonetheless, with rising doubts about the sustainability of U.S. stock valuations, China emerges as an attractive alternative for numerous investors. Vey-Sern Ling, managing director at Union Bancaire Privee, commented, “The necessary drivers are there for China tech to outperform, including top level government support, recovering earnings, and structural growth theme in AI.” He noted that U.S. tech valuations have increased for two years, but recent earnings disappointments along with macroeconomic factors have triggered a selloff, leading to a shift in investor focus from the U.S. to Europe and China.
In summary, China’s tech sector has achieved substantial growth, challenging the performance of U.S. stocks. The rapid rise of companies in China’s technology landscape, particularly in AI, reflects a shift in investor sentiment. As geopolitical factors and macroeconomic conditions weigh on U.S. equities, many investors consider Chinese tech stocks as viable alternatives, driven by government support and improved earnings prospects.
Original Source: news.az
