Chinese tech stocks surge 40%, outpacing U.S. Magnificent Seven
China’s AI innovation fuels $439 billion tech stock rally
A $439 billion rally in Chinese tech megacaps this year has propelled them far ahead of their once-dominant US peers, and investors believe there’s still room for further growth.
An equal-weighted basket of China’s top seven tech firms — including Alibaba Group Holding Ltd. and Tencent Holdings Ltd. — has gained over 40% in 2025. This performance starkly contrasts with the nearly 10% decline of the US "Magnificent Seven" tech stocks, a slump that has dragged the Nasdaq 100 Index close to correction territory, reports Bloomberg.
This unexpected reversal has caught Wall Street off guard. Earlier this year, the Nasdaq was breaking records, while Chinese stocks were still struggling with the aftermath of regulatory crackdowns and slow consumer recovery. But the launch of DeepSeek’s AI tools rapidly shifted sentiment, proving that China’s tech sector could compete with — and even surpass — American innovation in artificial intelligence.
AI Innovation and Government Support Fuel Gains
The rally in Chinese tech stocks gained further momentum this week after Beijing announced plans to increase support for the sector, alongside a wave of new AI products from firms like Alibaba. These moves have boosted confidence in China’s innovation capabilities despite ongoing US restrictions on advanced chip exports.
“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,” said Charu Chanana, chief investment strategist at Saxo Markets. “The momentum in the China AI plays has room to run, given the valuation discount.”
Societe Generale SA has dubbed China’s leading tech firms the "7 Titans" — a group that includes Xiaomi Corp., BYD Co., Semiconductor Manufacturing International Corp., JD.com Inc., and NetEase Inc. Despite their impressive growth, the basket still trades at 18 times forward earnings, offering a more than 40% discount compared to the US Magnificent Seven.
The Hang Seng Tech Index climbed more than 1% on Friday, bringing its weekly advance to roughly 10% and pushing the gauge to its highest level since late 2021. With continued government backing and ongoing innovation, Chinese tech stocks appear well-positioned for further gains.
Reminder, Chinese AI startup Zhipu AI has secured more than 1 billion yuan ($137.22 million) in fresh funding, just months after raising 3 billion yuan ($412 million) in December.
