Why it’s time to look at China for AI investment, according to a head strategist at a $6.6 trillion wealth manager

For ETF investors, the main question is not whether โ€œChina techโ€ is cheap, but what kind of AI exposure the fund actually packages. A China-focused technology ETF can behave very differently from a US megacap AI basket because the drivers are split across domestic policy, platform competition, and local demand for software, cloud and hardware.

That makes correlation as important as valuation. If an investor already owns US tech-heavy index funds, adding a China tech ETF may offer a separate return stream rather than simply more of the same risk. The strategic appeal is that two AI ecosystems can advance on different timelines and react to different headlines, even when both sit under the AI label.

Composition matters just as much as the theme. China technology ETFs are usually not broad market proxies; they tend to be concentrated in a narrower set of large internet, software, semiconductor and hardware names. That concentration can magnify both the upside and the downside when sentiment turns, so portfolio sizing and rebalancing discipline matter more than the headline theme.

Investors should also separate lower absolute valuation from lower risk. A fund can screen more attractively than US peers and still trade above its own historical norms. For long-term allocation decisions, the better question is whether the ETF adds a distinct economic exposure, or simply layers another volatile growth bet onto an already crowded tech allocation.

  • China tech stocks look attractive relative to stretched valuations among US counterparts, Jason Draho says.
  • The UBS Wealth Management exec says the sector offers AI exposure uncorrelated to swings in US tech.
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AI stocks dominate passive indexes like the S&P 500 and the Nasdaq. So if you’re looking for ways to diversify your portfolio, you might considerโ€ฆmore AI stocks? Well, Chinese AI stocks, anyway. According to Jason Draho, the head of asset allocation Americas at UBS Global Wealth Management, which manages $6.6 trillion, the Chinese tech sector offers an attractive way to counterbalance positions in US tech, which investors appear to be growing skeptical of amid stretched valuations. While it may seem like the sectors would move in lockstep, they actually have a low degree of correlation, Draho said. One potential reason for this is that they’re competing against each other. For example, DeepSeek’s chatbot release earlier this year sent US tech stocks plummeting. “If, say, China tech or China AI models end up being ahead of the US, just as a hypothetical, that helps diversify if they outperform,” Draho told Business Insider. “There’s different drivers behind them, both domestic politics, but also just the technology itself,” he continued. “So they could both outperform their markets but also kind of perform somewhat independently.” Some have also argued that Chinese tech stocks are attractive because of their low valuations relative to US tech. “A lot of these big Chinese tech firms are trading at half to a third of the US tech valuation, and they’re coming out with you would say” rival US AI products, said Jason Hsu, the founder of Rayliant Global Advisors. But Draho said that while Chinese tech stocks trade at lower absolute valuations than US tech stocks, they are still expensive relative to their own history. For example, the Chinese stock market trades at a 14x forward PE ratio, compared to around 11x a year ago, he said. Still, Draho is bullish on Chinese tech stocks for fundamental reasons, and as a hedge to US tech. Examples of funds offering exposure to Chinese tech stocks include the Invesco China Technology ETF (CQQQ) and the iShares MSCI China Tech UCITS ETF USD (Acc) (CTEC). So far this year, the Invesco China Technology ETF has returned 38%, outperforming the Nasdaq 100’s 19% gain.
https://www.businessinsider.com/ai-stocks-where-to-invest-china-tech-sector-hedge-ubs-2025-11

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