• Chinese tech stocks have gained over 40% this year, adding $439 billion in value
• China’s “7 titans” are outperforming the US “Magnificent Seven” tech stocks which have dropped about 10%
• The rally was sparked by DeepSeek’s AI advancements and boosted by Beijing’s tech support plans
• Chinese tech stocks trade at a 40% discount compared to US counterparts
• Despite the recent gains, the Hang Seng Tech Index remains about 40% below its 2021 peak

Chinese technology megacaps have staged a remarkable comeback in 2025, adding $439 billion in market value while their American counterparts face mounting challenges. This surprising shift has caught many Wall Street investors off guard.

An equal-weighted basket of China’s “7 titans” – including Alibaba Group Holding Ltd. and Tencent Holdings Ltd. – has surged more than 40% this year. This stands in stark contrast to the roughly 10% decline seen in the “Magnificent Seven” US tech stocks.

The Chinese tech resurgence has pushed the Nasdaq 100 Index to the edge of a correction. This represents a dramatic reversal of fortunes that few market watchers anticipated.

Earlier this year, the Nasdaq had reached yet another record high. Chinese stocks, meanwhile, were still struggling with the aftermath of regulatory crackdowns and weak consumer spending.

The turning point came with DeepSeek’s unexpected breakthrough. The Chinese AI firm challenged the notion that China would take years to catch up to America’s artificial intelligence capabilities.

Since DeepSeek Chinese tech stocks have rallied

Since this development, Chinese tech stocks have rallied consistently. Even longtime skeptics have begun to adopt a more optimistic outlook on these companies.

Beijing’s recent announcement of increased support for technology companies has further fueled the rally. New AI tools from companies like Alibaba have also contributed to market enthusiasm.

Charu Chanana, chief investment strategist at Saxo Markets, noted the significance of these developments. “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.”

The “7 titans” group also includes Xiaomi Corp., BYD Co., Semiconductor Manufacturing International Corp., JD.com Inc., and NetEase Inc. According to Societe Generale SA, these stocks were selected based on market capitalization and growth trajectory.

Excellent value compared to the Magnificent Seven

The Chinese tech basket currently trades at 18 times forward earnings. This represents more than a 40% discount compared to the Magnificent Seven US tech stocks.

The Hang Seng Tech Index gained over 1% last Friday. This pushed the weekly advance to approximately 10%, bringing the index to its highest level since late 2021.

While Chinese equities gain momentum, US stocks face multiple challenges. President Donald Trump’s trade policies have created uncertainty for American businesses and consumers through new tariffs.

The multi-year bull run in US big tech stocks, led by Nvidia Corp., has hit obstacles. Investors are questioning the high valuations and demanding stronger earnings results.

Despite the current optimism surrounding Chinese tech, some investors remain cautious. China’s history of negative market returns, unexpected policy changes, and rising tensions with the US under Trump are keeping some on the sidelines.

The Hang Seng Tech Index remains about 40% below its 2021 peak despite this year’s gains. Its five-year return of approximately 18% is far below the Nasdaq 100’s more than 130% rally during the same period.

With growing concerns about overvaluation in US stocks, China has become a viable alternative for many investors. Vey-Sern Ling, a managing director at Union Bancaire Privee, summed up the situation: “The necessary drivers are there for China tech to outperform, including top level government support, recovering earnings, and structural growth theme in AI.”