Ignoring overseas "AI panic," China's market is wildly betting on AI winners

While the US market is caught in an “AI panic trading” phase, with investors selling off software companies and wealth management firms, Chinese investors are heavily chasing artificial intelligence concept stocks. This starkly different market sentiment reflects a fundamental divergence in how investors in the two regions view AI technology: the US worries about existing business models being disrupted, while China focuses on growth opportunities and cost reduction potential.

Domestic companies releasing new models or upgrading existing products this month have become favorites among investors. MiniMax and Zhipu AI are the most typical examples, with both companies’ stock prices doubling in February. Bullish ratings from Wall Street investment banks like Morgan Stanley further fueled market enthusiasm, with pure AI concept stocks competing for funds away from traditional internet giants.

This market divergence is driven by differences in investment logic. Charu Chanana, Chief Investment Strategist at Saxo Markets, stated that the Chinese market still focuses on what AI can help with, rather than what it will take away from existing companies. US investors are anxious about the threat to lucrative profit pools from competition, while China remains focused on market penetration.

Newly listed AI stocks lead the rally

MiniMax and Zhipu AI are favored by investors partly because there are few listed companies building large models globally. Both companies listed in Hong Kong in January, with Zhipu AI’s stock price soaring by 524% and MiniMax surging 488% afterward. In comparison, industry pioneers like OpenAI and Anthropic have yet to go public.

Other recently listed Chinese AI-related stocks also performed strongly. Chip design firm Bairen Technology has gained over 80% since its January 2 listing, and Lianqi Technology has surged more than 98% since its February 9 listing.

Domestic companies also benefit from a halo effect, as private funding rounds for two US firms show continued valuation increases. OpenAI is close to raising over $1 billion at a valuation exceeding $85 billion, and Anthropic raised $300 million in early February at a $38 billion valuation.

Technological breakthroughs boost valuations

The release of new models and financing data have driven valuation re-ratings. In a report on February 13, Jefferies analyst Edison Lee wrote, “There is upward room for Chinese AI valuations.”

Zhipu AI’s latest large language model, GLM-5, recently surpassed the competing model launched by Moonshot AI on the benchmark site Artificial Analysis, becoming the top open-source model globally. According to Jefferies’ report, this is the highest ranking ever achieved by a Chinese AI lab.

Part of the market enthusiasm is related to DeepSeek, which is expected to release its next-generation model soon, potentially boosting the entire sector. The market also anticipates that cost competitiveness of Chinese AI models like DeepSeek could accelerate user adoption.

Currently, domestic investors see every AI development as a catalyst, benefiting not only developers but also users of new tools. ByteDance recently launched a video creation app, which triggered a collective rise in media and entertainment stocks.

Gary Tan, Portfolio Manager at Allspring Global Investments, said, “The divergence between Chinese market participants and global investors reflects the structural uniqueness of China’s AI landscape.” However, some market observers warn that if profit growth cannot keep pace with investor optimism, valuation re-ratings may be difficult to sustain.

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