Chinese tech giants have rallied by $439 billion this year, outpacing their U.S. counterparts, with many investors believing this momentum could continue. An equal-weighted basket of China’s seven tech megacaps—including Alibaba Group Holding Ltd. and Tencent Holdings Ltd.—has gained more than 40% in 2025. In contrast, the “Magnificent Seven” stocks in the U.S., which have been a market driver, have seen a drop of approximately 10%. This slump has contributed to the Nasdaq 100 Index nearing correction territory.
This reversal of fortunes marks a surprising turn in the global tech landscape, one few on Wall Street predicted. Earlier in the year, the Nasdaq had reached new heights while Chinese stocks were still recovering from years of regulatory crackdowns and a slow consumption rebound. However, the narrative shifted dramatically with the rise of new AI breakthroughs, most notably from China’s DeepSeek, which challenged the belief that China might never catch up to the U.S. in AI innovation.
Since this turning point, Chinese tech stocks have surged, prompting even long-time skeptics to reconsider their stance. The rally received an additional boost after Beijing announced plans to increase support for domestic tech companies, alongside the unveiling of new AI tools from major players like Alibaba.
“The DeepSeek success, followed by a suite of AI models from China, has reminded the world that China’s innovation should not be underestimated despite U.S. chip export restrictions,” said Charu Chanana, chief investment strategist at Saxo Markets. “The momentum in China’s AI sector has room to run, especially given the valuation discount.”
Societe Generale identified the seven tech titans, which also include Xiaomi Corp., BYD Co., Semiconductor Manufacturing International Corp., JD.com Inc., and NetEase Inc., based on their market capitalization and growth trajectory. These stocks currently trade at 18 times forward earnings, a discount of more than 40% compared to the Magnificent Seven.
The Hang Seng Tech Index rose more than 1% on Friday, bringing its weekly gain to around 10%. The index is now trading at its highest level since late 2021, signaling continued investor optimism for China’s tech sector.
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