China resists global ‘AI fear trade’ as investors chase winners

issued Sunday, February 22, 2026 · 12:51 PM

U.S. markets have been dominated by an “AI fear trade,” with investors selling software companies and asset managers over concerns that rapid advances in artificial intelligence (AI) will erode established business models.

In China, the atmosphere is much brighter. Instead of worrying about disruption, investors are chasing potential winners, attracted by AI’s growth prospects and potential to drive cost savings for end users.

Local companies that release new models or upgrade existing models are favorites of investors. MiniMax Group and Knowledge Atlas Technology JSC (better known as Zhipu) are the most notable examples, with their shares more than doubling in February.

Bullish ratings from Wall Street banks, including Morgan Stanley, are fueling optimism as pure AI initiatives lure investors away from traditional internet giants.

“China has been relatively isolated from the AI ​​fear trade because the market is still focused on what AI can help incumbents rather than what it can take away from them,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “While there is fear in the US that competition will take away the profit pool of the wealthy, in China they are still trying to penetrate.”

One of the key reasons for the different investor focus is China’s relatively isolated competitive environment, where regulatory constraints and geopolitical tensions limit foreign participation by AI companies.

Gary Tan, portfolio manager at Allspring Global Investments in Singapore, said the disconnect between Chinese market participants and global investors “reflects how structurally different the AI ​​landscape is in China.” Foreign large-scale language models (LLMs) “have limited access to the domestic market, giving local model makers an advantage.”

MiniMax and Zhipu’s support from investors is also due to the lack of global listed companies building LLMs. Both stocks debuted in Hong Kong in January. Since then, Zhipu stock is up 524% and MiniMax stock is up 488%. OpenAI and Anthropic, considered pioneers in the field, are privately held.

Other Chinese AI-related stocks that recently debuted are also rising strongly. Among chip designers, Shanghai Bilian Technology’s stock price has risen more than 80% since its listing on January 2nd, while Montage Technology’s stock price has risen more than 98% since trading began on February 9th.

Chinese companies are also riding on the halo effect, with new private funding rounds for two first movers indicating valuations continue to rise. OpenAI is closing in on more than $100 billion in new funding at a valuation that could exceed $850 billion, and Anthropic raised $30 billion earlier this month at a valuation of $380 billion.

Analysts at Jefferies Financial Group, including Edison Lee, wrote in a Feb. 13 note that the new model and number of financings are contributing to the higher rerating. “China’s AI reputation has room to rise.”

Some market observers have warned that the re-rating could be difficult to sustain if earnings growth doesn’t keep up with investors’ optimism. There are also concerns that by focusing on AI champions, investors are overlooking a more unpleasant reality: disruption risks that could impact a variety of sectors and thereby negatively impact corporate earnings across broader markets.

“My interest has been rekindled”

But for now, Chinese investors see each new AI development as a catalyst not only for developers but also for users of new tools. The recent rollout of a video creation app by TikTok owner ByteDance sparked a rally in movie and media stocks.

Zhipu recently released the latest version of LLM, GLM-5. This surpasses Moonshot AI’s rival, which was announced just a few weeks ago, and took the top spot among open source models worldwide on benchmarking site Artificial Analysis. According to Jefferies’ memo, this is the highest ranking ever achieved by a Chinese AI institute.

Part of this excitement has to do with DeepSeek, the company that sparked a global frenzy for China’s burgeoning AI industry. The company is expected to release its next-generation model soon, which could boost the entire industry.

There is also hope that the cost competitiveness of Chinese AI models like those developed by DeepSeek could accelerate user adoption.

Morgan Stanley, Jefferies, and UBS Group began covering MiniMax with ratings equivalent to buy. Morgan Stanley predicts that the company’s revenue could reach around US$700 million by 2027, suggesting an increase of up to 10 times over the next two years.

Billy Leung, investment strategist at Global

“Funds are rotating into pure AI names, with diversified platforms like Alibaba and Tencent seeing profit taking.”Bloomberg