BlackRock Supports China Tech in AI Rush, Exec Highlights Self-Reliance

As of September 12, major investment firms continue to prioritize Chinese technology stocks, citing the significant valuation gap compared to global competitors, particularly in the U.S. This interest is driven by China’s rapid growth in artificial intelligence, the nation’s efforts to achieve self-sufficiency in the semiconductor industry, and the ongoing push for technological independence, according to an exclusive interview with the CIO for the Middle East and Asia at a leading investment institute.

Despite the recent slowdown in U.S. nonfarm payrolls, industry experts believe the U.S. economy is more likely heading toward a moderate deceleration rather than a full-blown recession. U.S. wage increases remain steady, which could keep inflation elevated and prevent it from returning to the target level quickly. As a result, some expect the Federal Reserve to implement two rate cuts this year, contrasting with the market’s more aggressive forecasts of five to six cuts.

“The U.S. is experiencing an unusual drop in labor supply due to post-pandemic recovery effects, combined with changes in immigration policies like the deportation of illegal immigrants and an aging population. These factors make it harder to interpret employment data. Even if payroll numbers appear weak, it might reflect shrinking supply rather than declining demand. Investors should analyze these signals carefully and avoid overconfidence,” the expert said.

Interest Rate Reductions

“Inflation remains relatively high, and tariffs could further fuel inflation increases in the coming quarters, complicating the outlook,” he explained. Compared to other financial institutions, this firm maintains a more cautious stance on interest rate cuts. It predicts the Fed will reduce rates twice this year, once in September and again later, bringing the rate down to 4 percent.

In contrast, some firms, such as Morgan Stanley, anticipate up to six rate cuts within this cycle, lowering the neutral interest rate to around 3.25 percent.

Overall, they remain optimistic about U.S. large-cap tech stocks driven by artificial intelligence over the next year. Additionally, the expectation is that the U.S. dollar will weaken in the coming months.

Market Resurgence

China’s stock market has experienced a robust rebound this year. However, some market participants remain skeptical, suggesting that the rally is mainly liquidity-driven and lacks solid fundamental support. Nevertheless, the investment firm believes the upward trend is underpinned by sound economic fundamentals. Global investors are increasingly recognizing that AI development is not exclusive to the U.S., and China has notable advantages in this area.

China benefits from a large pool of highly skilled engineers, supportive government policies, and a dynamic capital market. Previously, a substantial valuation gap existed between Chinese and U.S. tech stocks, but recent improvement in valuations has bolstered confidence domestically. Meanwhile, Chinese investors, facing low-interest rates, are more inclined to shift funds toward equities with higher growth potential.

Growing Demand for Computing Power

A recent report from Goldman Sachs highlighted that China’s demand for computing power surged starting in 2025, driven by the AI boom. The capital expenditure growth rate of China’s top cloud providers—Alibaba Cloud, Tencent Cloud, Huawei Cloud, and ByteDance—has far outpaced global averages.

Furthermore, Morgan Stanley projects that the rising demand for computing power will boost the need for AI chips, memory chips, and high-speed interconnection tech. They estimate that by 2027, China’s domestic graphics processing units will satisfy only 39 percent of AI demand. To reduce reliance on foreign suppliers like Nvidia, Chinese AI chip manufacturers are increasing investment in R&D. Additionally, advanced packaging technologies like CoWoS and CPO are emerging as critical solutions to overcome computing limitations in the country.