China defies global ‘AI scare trade’ as investors chase winners

US markets are gripped by the “Al scare trade,” with investors selling software firms and wealth managers on concern that rapid advances in artificial intelligence will erode established business models.

- Bloomberg [e-mail]

In China, the mood is far more upbeat. Instead of worrying about disruption, investors are chasing perceived winners, drawn by AI’s growth prospects and its potential to drive cost savings for end users.

Local firms that have released new models or upgraded existing ones are investor favorites. MiniMax Group Inc. and Knowledge Atlas Technology JSC Ltd.—better known as Zhipu—are the most notable examples, with their stock price more than doubling in February.

Bullish ratings from Wall Street banks including Morgan Stanley are fueling the optimism as pure AI plays lure investors away from traditional Internet giants.

“China has been relatively insulated from the AI scare trade because the market is still focused on what Al can aid rather than what it can take away from incumbents,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “In the US, there’s anxiety about rich profit pools getting competed away, while China is still about penetration.”

One key reason for the divergence in investor focus is China’s relatively insulated competitive landscape, where regulatory constraints and geopolitical tensions limit foreign participation by AI-related companies.