Despite the looming threat of additional U.S. restrictions on advanced chip exports, some Asian hedge funds are doubling down on leading Chinese tech firms like Xiaomi and Baidu, attracted by their advancements in artificial intelligence (AI) and untapped domestic potential.
According to Yahoo Finance, while U.S. curbs have kept global investors cautious, savvy fund managers are eyeing China’s homegrown AI innovations, particularly as these companies develop large language models (LLMs) tailored to their massive domestic market. With valuations lower than their U.S. counterparts, Chinese tech firms present a compelling case for investment.
AI in Everyday Chinese Life
Fund managers are optimistic about the growing adoption of AI across China’s population of 1.4 billion. From smartphones and wearables to gaming and social apps, AI is becoming an integral part of daily life.
“Chinese innovations are reaching end-users rapidly,” said Nilesh Jasani, founder of GenInnov Funds. Jasani’s fund has been increasing its exposure to Chinese tech, focusing on firms like Xiaomi and Baidu, which are leading the charge in mobile AI technologies.
Baidu and Xiaomi Lead the Pack
Baidu, China’s top search engine, is making waves with its AI offerings. The company recently launched a text-to-image generation tool for advertisers and is set to release AI-powered glasses in early 2025. Baidu also plans to expand its robotaxi service beyond mainland China.
Meanwhile, Hong Kong hedge fund Monolith Management is bullish on Xiaomi. Timothy Wang, the firm’s chief investment officer, praised Xiaomi’s HyperOS, a self-developed AI-driven operating system. With its vast ecosystem of Internet of Things (IoT) devices and electric vehicles, Xiaomi offers a robust platform compared to its Western competitors.
Chinese Tech’s AI Potential
Chinese AI stocks have underperformed compared to U.S. tech giants during the global AI boom. For example, while the Hang Seng Tech Index rose 19% in 2023, the Nasdaq 100 surged over 30%. However, experts like Sean Ho, CIO of Triata Capital, remain optimistic.
Ho highlights breakthroughs like text-to-video AI and multimodal models, as well as high rankings of Chinese AI systems on platforms like Hugging Face. These achievements signal China’s ambition to lead globally in AI despite ongoing geopolitical tensions.
Skepticism remains, with some investors questioning whether Chinese firms can effectively monetize AI at the same scale as their U.S. counterparts. However, for fund managers with a long-term vision, the potential of China’s AI revolution in 2025 is hard to ignore.
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