The Chinese AI boom ignites, investors ignore global disruption concerns

Investing.com – While Wall Street is currently engulfed in “AI panic trading,” with investors selling software and wealth management stocks out of fear of disruption, the Chinese market is moving in the opposite direction. Investors in mainland China and Hong Kong are not worried about AI potentially destroying anything; instead, they are actively chasing companies they consider to be winners.

This optimism stems from AI’s potential to penetrate new markets and significantly reduce costs for end users. This has created a stark divergence between the world’s two largest economies. Popular local stocks like Moonlight Technology Limited (HK: 970) and Zhipu Huazhang Technology Co., Ltd. (HK: 725) have seen their valuations explode as a result.

In just February, these stocks more than doubled. This was driven by a rotation of funds from traditional internet giants like Alibaba and Tencent into “pure” AI concept stocks. Due to regulatory barriers limiting the entry of foreign models like OpenAI, strategic isolation has provided these domestic companies with a clear, uncontested growth space in the local market.

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Domestic Dominance and the “Halo” Effect

China’s AI frenzy is supported by the “halo effect” generated by large-scale private funding rounds worldwide. Reports indicate that OpenAI’s valuation target exceeds $850 billion, and Anthropic has raised funds at a $380 billion valuation. Chinese companies are experiencing significant revaluations.

Jefferies analysts believe that Chinese AI valuations still have considerable upside potential, especially as domestic labs reach new performance milestones. Zhipu’s latest model, GLM-5, recently topped the open-source model rankings in Artificial Analysis. This marks the highest achievement ever for a Chinese AI lab in global rankings.

This technological progress, combined with cost-competitive models from companies like DeepSeek, is accelerating AI applications in film, media, and corporate sectors. It has even triggered a secondary rebound in industries poised to benefit from using these new tools.

Institutional Support and Sustainability Risks

Major Wall Street institutions are adding further credibility to this rally. Morgan Stanley, Jefferies, and UBS have all begun coverage of Moonlight Technology, assigning ratings equivalent to “buy.” Morgan Stanley issued a particularly aggressive forecast, estimating that Moonlight’s revenue could reach $700 million by 2027.

This institutional backing reinforces the narrative that China remains in the “penetration phase” of the AI cycle. In contrast, many believe the US has already entered the “anxiety phase.”

However, seasoned market observers warn that if profit growth fails to keep pace with the hype, the current revaluation may be difficult to sustain. Increasingly, concerns are growing that investors are overlooking the same disruption risks plaguing the US market. For now, though, the momentum remains firmly in the hands of genuine AI developers.

Simon Mugo reports

This article was translated with the assistance of artificial intelligence. For more information, see our Terms of Use.