Global trade uncertainties are casting a shadow over Wall Street's tech giants, with heavyweights like Nvidia and Amazon feeling the pinch. In contrast, Chinese tech stocks are experiencing a surge, propelled by robust government support and a favorable economic environment.​

US vs China

Chinese equities, once deemed "uninvestable," are rebounding, while US stocks face multiple setbacks. The narrative of US market exceptionalism is weakening as Trump’s tariffs disrupt global trade and dampen business sentiment. Big tech, led by Nvidia, is faltering under valuation concerns and higher expectations.

Despite renewed optimism, China's long-term market risks and geopolitical tensions under Trump keep some investors cautious. The Hang Seng Tech Index is still 40% below its 2021 peak and has underperformed the Nasdaq 100 over five years.

However, with US stock valuations looking stretched, China is emerging as an alternative. According to Vey-Sern Ling of Union Bancaire Privee, government support, earnings recovery, and AI-driven growth are setting the stage for Chinese tech outperformance, fueling a shift from US to European and Chinese markets.

Chinese Tech Stocks Surge

The Hang Seng Tech Index has risen over 14.49% this year, outpacing the NYSE FANG+ Index, which has gained 6.31% in the same period. This divergence became more pronounced following President Trump's tariff announcements, which introduced volatility into U.S. tech stocks.​

Analysts attribute this shift to differing policy approaches. While the U.S. has imposed tariffs, China has introduced stimulus packages to bolster its economy. These measures have provided a more stable environment for Chinese tech companies.​

U.S. Tech Giants Face Challenges

U.S. tech stocks are contending with multiple challenges. President Trump's tariffs have disrupted supply chains and increased costs. Additionally, companies like Apple and Amazon are under regulatory scrutiny, and Meta is embroiled in an antitrust trial.​

The recent emergence of DeepSeek, a Chinese AI firm offering cost-effective solutions, has intensified competition, raising questions about the dominance of U.S. tech companies.​

China's Tech Sector Gains Traction

Despite concerns over China's long-term market performance, the country's tech sector is gaining investor confidence. The Hang Seng Tech Index remains about 40% below its 2021 peak, but recent gains indicate a potential turnaround.​

Vey-Sern Ling, Managing Director at Union Bancaire Privée, notes that China’s tech sector benefits from government support, recovering earnings, and structural growth themes in AI. In contrast, U.S. tech valuations have surged over the past two years, and earnings disappointments, coupled with macroeconomic factors, are driving a selloff.​

Policy Divergence: U.S. vs. China

Beijing has implemented monetary and fiscal policies aimed at revitalizing its economy, supporting startups, and encouraging innovation in the tech sector. Conversely, the U.S. has introduced tariffs and tightened immigration policies, creating an unpredictable environment for companies and leading to investor caution.​

Recently, China announced measures to attract foreign investment in its technology sector, including support for foreign institutions issuing yuan-denominated bonds and encouraging tech companies to raise funds through bond issuance.​

U.S. Tech Giants Under Scrutiny

U.S. companies are facing increasing regulatory challenges, impacting investor confidence and potentially affecting future growth prospects. Apple and Amazon are among the leading tech giants under heightened scrutiny, while Meta is embroiled in an ongoing antitrust trial.​

The recent entry of DeepSeek into the tech space has raised questions about the dominance of U.S. tech companies. DeepSeek's low-cost AI model has proven competitive, challenging the belief that AI development requires heavy investments.​

Chinese Stocks Attract Foreign Investment

Chinese stocks have become increasingly popular among foreign investors. Institutions like Goldman Sachs, Morgan Stanley, and Daiwa Securities have raised price targets for various Chinese stocks, including Alibaba and BYD. Additionally, foreign investors have stepped up their purchases of Chinese stocks, with South Korean investors' monthly trading volume in A-share and Hong Kong stocks reaching $782 million in February, marking a nearly 200% increase compared to the previous month.​

Analysts suggest that China's tech innovation is reshaping the global investor landscape. Jeff Weniger, head of stock strategy at WisdomTree Investments, notes that the rise of the "Terrific Ten" Chinese tech stocks poses a challenge to the "Magnificent Seven" U.S. stocks, indicating a subtle shift in the market landscape.​

Improving Sentiment in Chinese Tech

The shift in market sentiment reflects growing interest among global investors in Chinese tech stocks. Companies like DeepSeek and Moonshot AI have evolved from "followers" to "leaders" in their respective fields, achieving significant breakthroughs. Deutsche Bank analyst Peter Milliken highlights that innovations in AI and electric vehicles will serve as catalysts for global money to return to Hong Kong and A-share stocks.​

China's economic transition, driven by technological innovation, is fostering growth in sectors like humanoid robotics and large AI models. The Government Work Report emphasizes the development of new quality productive forces and the acceleration of a modernized industrial system, laying the groundwork for long-term economic expansion.​

Wall Street Braces for ‘Magnificent 7’ Tech Stocks Earnings This Week!

The Nasdaq slipped Monday as Wall Street braces for earnings from the "Magnificent Seven" tech giants amid rising concerns over Trump’s aggressive tariffs. Apple, reporting Thursday, is under scrutiny for potential supply chain issues, while Microsoft, Meta, and Amazon's AI investment plans will also be closely watched.

The tech sector remains pressured by tariff fears, with firms like Tesla withdrawing guidance and Apple expected to stay cautious. Meanwhile, competition from China's Huawei and AI startups like DeepSeek add to the uncertainty.

Though some earnings, like Alphabet’s, have impressed, Wall Street remains wary about the broader economic impact of the trade war.

Conclusion

As global trade uncertainties continue to impact U.S. tech giants, Chinese tech stocks are gaining momentum. With supportive government policies, recovering earnings, and advancements in AI and electric vehicles, China is emerging as a viable alternative for investors seeking growth opportunities. The evolving dynamics between the U.S. and China are reshaping the global tech landscape, presenting new challenges and opportunities for investors worldwide.