By Summer Zhen
HONG KONG (Reuters) – Some Asian hedge funds are betting on leading Chinese technology companies such as Xiaomi and Baidu, buoyed by their innovations in artificial intelligence, despite the threat of further U.S. restrictions that could come into effect next year.
A US ban on the export of advanced chips to China has kept many global investors on the sidelines. But those scouring China for potential winners say companies there are developing AI products for a huge domestic market as their homegrown large language models catch up and valuations are lower than their U.S. counterparts.
Fund managers say they are particularly optimistic about the increasing adoption of AI in the lives of China’s 1.4 billion people, from mobile phones and smart wearables to social apps and games.
“Chinese innovations are quickly reaching end users,” said Nilesh Jasani, founder of GenInnov Funds and former vice chairman for Asia at Jefferies.
“We are extremely excited about China’s rise in mobility and mobile telephony, which is benefiting names like Xiaomi and Baidu,” he said, noting that his fund has increased exposure to China.
Leading Chinese search engine company Baidu recently launched a text-to-image generator tool for its advertising clients. It also plans to launch AI glasses and introduce its robotaxi service outside mainland China early next year.
Hong Kong hedge fund Monolith Management, which manages assets worth $300 million, has set its sights on smartphone maker Xiaomi and its suppliers.
“Xiaomi offers a compelling AI user experience through its proprietary HyperOS, with a larger ecosystem of IoT and automotive to tap, compared to its Western counterparts,” said Timothy Wang, chief investment officer at Monolith.
Chinese tech stocks have lagged their U.S. counterparts in the global AI frenzy this year.
The Hang Seng Tech Index and the CSI AI sector are up 19% and 21% respectively, while the Nasdaq 100 is up more than 30%.
But Wang predicts growth opportunities for China’s own AI-powered products and services in the coming year. Progress would be driven by the proliferation and commercialization of major language models, coupled with the country’s supply chain strengths and a wealth of skilled product managers, he said.
ByteDance’s AI chatbot Doubao became the world’s second most popular AI application in November with 60 million monthly active users, behind only ChatGPT, according to Aicpb.com.
“We’re seeing breakthroughs in AI software such as text-to-video generation and multimodal AI,” said Sean Ho, CIO of Triata Capital, which manages $770 million in assets.
