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Chinese AI stocks to drive markets in 2026, banks say
Chinese AI-related stocks are expected to remain a key driver for Hong Kong and mainland markets in 2026, though growth is likely to slow, according to Julius Baer and Citibank.
Julius Baer set a 12-month target of 29,500 for the Hang Seng Index and 5,100 for the CSI 300, implying potential gains of 12.8% and 7.6%.
The bank cited continued foreign investment in Chinese tech stocks, but flagged rising capital expenditure and unclear AI profitability as concerns.
Citibank maintained a year-end Hang Seng Index target of 28,800 and said the internet and games sector should continue to benefit from AI.
It noted that market performance still depends on consumer confidence and property prices in China.
🔗 Source: South China Morning Post
🧠 Food for thought
Implications, context, and why it matters.
China’s AI stocks need proof of real returns from 2025 spending
- China’s 2025 AI spend totals $84–98 billion across government, telecommunications companies (telcos), and private firms 1. Tencent spent $5.4 billion (RMB 39 billion) in Q4 2024 and guides 2025 capital expenditure (capex) to low teens of revenue 2. Profit is thin, as Baidu posted a ~$1.58 billion Generally Accepted Accounting Principles (GAAP) net loss despite 262% growth in AI‑native marketing 3. Alibaba Cloud sits near a 9% Earnings Before Interest, Taxes, and Amortization (EBITA) margin 4. Julius Baer pegs 12.8% upside and flags rising capex, while Citibank sees sector gains. The rally hinges on 2026 calls that reveal AI revenue with margin lift. Baidu’s total revenue fell 7% year over year in Q3 2025, and online marketing dropped 18% 3.
ETF issuers face a short window to catch retail demand for China AI
- Tech Buzz China’s (a research outlet focused on China tech) top 100 AI sample reached 4.78 billion Monthly Active Users (MAUs) in August 2025, with China near 46% (~2.2 billion), and figures are not deduplicated 5. Only four Chinese firms make the global top 100 by Annual Recurring Revenue (ARR), at 1.23% of $36.4 billion 5. Existing China AI Exchange-Traded Funds (ETFs) include DRGN (0.39% expense ratio) and Global X’s 2807, which track indices 67. Managers can focus on the middle layer. Startups in data governance, model routing (software that directs tasks to the most suitable AI model) and automation show steadier cash flow than creative tools 5. Durable inflows need earnings over buzz from DeepSeek efficiency stories (DeepSeek is a China-based AI model known for attention grabbing efficiency claims) 8.
