Three years after foreign capital retreated en masse and loudly declared the Chinese market "uninvestable," foreign investors are now returning in droves to Chinese equity markets, seeking to capitalize on unprecedented investment opportunities in Chinese technology stocks driven by cutting-edge technologies such as artificial intelligence, robotics, and innovative pharmaceuticals. Additionally, as Trump's series of radical measures gradually erode "American exceptionalism," there is growing demand for diversified allocation beyond US assets.

China's continuous breakthrough progress this year in frontier technologies including AI adoption and penetration, semiconductors, and innovative drug development has increasingly convinced foreign investors, including Wall Street asset management giants, that negative events such as the China-US trade war and Washington's technology export restrictions have not curtailed innovation and resilient economic expansion in the world's second-largest economy.

The "Chinese tech stock carnival moment" sparked by the AI and robotics boom, the temporary ceasefire in the China-US tariff battle, and the domestic monetary easing environment have further boosted global capital's bullish sentiment toward Chinese stock markets (including Hong Kong stocks and A-shares).

The result of this capital influx is that the Shanghai Composite Index is approaching 3,900 points, touching a ten-year high last week, while Hong Kong's benchmark index, the Hang Seng Index, reached a four-year high. The cry of "going long on China" echoes throughout Wall Street.

The dramatic shift in foreign investor sentiment—from disbelief in the Chinese market three years ago to a "cautious" stance at the end of last year, and now to escalating bullish enthusiasm—may add strong bullish momentum to the current bull market rally primarily driven by domestic private equity institutions and other local capital.

Brett Barna, former top hedge fund manager who now manages two New York-based single family offices, stated that "early bird foreign capital" attracted by this year's hot Chinese bull market and urgently seeking diversified allocation to spread risk away from crowded and historically high-valued US equity assets has returned to China.

"The Chinese market is interesting because it has very low correlation with the rest of the world, at least in the onshore A-share market," Barna said in a media interview, adding that he plans to build an investment platform to allow US and European capital more convenient access to Chinese capital markets.

A recent survey by Morgan Stanley shows that US investors are showing far higher interest in Chinese stocks than during 2021-2024. Among these, AI humanoid robots, biotechnology, and innovative consumption sectors are the main focus areas, though concerns remain, and the institution also reminds investors to watch certain indicators.

The institution emphasizes that US investors' positive investment interest in Chinese stocks is at its highest since the COVID pandemic: roadshows span both East and West coasts. Whether at the index level or targeting specific themes and structural opportunities, US investors' attention to the Chinese market has surprised them considerably.

Morgan Stanley stated that over 90% of US investors they met clearly expressed willingness to increase China allocation, the highest level since Chinese stocks peaked in early 2021. The bank noted that multiple factors jointly drive the recovery in investment willingness, and since the beginning of this year, US investors have agreed with the institution's constructive view on China. The bank has recommended overweighting A-shares since June and is optimistic about thematic investment opportunities in artificial intelligence, robotics, and semiconductors.

Morgan Stanley's survey also indicates that US investors' investment interest in the Chinese market has extended beyond ADRs and internet sectors to the A-share market. Historically, the institution observed that US investors concentrated on Chinese concept ADRs due to trading hours and time zone restrictions. However, recently multiple themes and sectors (including AI, semiconductors, humanoid robots, new consumption, etc.) primarily trade on the Hong Kong Stock Exchange and A-share markets.

Quantitative funds and macro funds that the institution recently contacted also mentioned that when time and resources are insufficient to support "bottom-up" stock selection, they find participating in the Chinese market through A-share ETFs and index futures products to be the most direct and expeditious method.

Global hedge funds are significantly increasing investments in China. Data on fund issuance and capital flows, particularly the recent significant expansion of inflows into China-related ETFs publicly traded in Western stock markets such as US stocks (for example, the popular Chinese internet ETF KWEB in the US stock market), demonstrates foreign investors' growing investment enthusiasm for the $19 trillion Chinese stock market (including Hong Kong stocks and A-shares).

A Morgan Stanley research report shows that global hedge funds' net purchases of Chinese equity assets in August reached their largest scale in six months, though specific figures were not disclosed. Statistics from Goldman Sachs, another Wall Street financial giant, show that in August, global hedge funds' net purchases of Chinese stock markets reached new highs since September 2024, and hedge funds' positions in Chinese equity markets rose 76 basis points to a two-year high.

Data from Morningstar, one of the major international rating agencies, shows that the number of new emerging market equity funds "excluding China" in 2025 dropped to 8, compared to 21 in 2024 and 16 in 2023. This means investment demand for emerging markets excluding China has cooled significantly this year.

"A year ago, investors even wanted to exclude China from emerging market indices. Now, China is viewed as an independent asset class they cannot ignore," said Zheng Yucheng, Chief Investment Officer of the China fund business unit at Allianz Global Investors.

Jerry Wu, a fund manager at London-based Polar Capital, which manages $20 billion in assets, said the company shifted its China investment stance from "underweight" to "actively overweight" at the end of 2024, and this year further increased China asset allocation in its emerging market portfolio from the low 20% range to over 30%.

He emphasized that at the annual conference held in February this year, the China-focused session was packed, attracting 55 major clients, more than doubling from 2023.

Chinese tech stocks' unstoppable surge momentum continues. Jerry Wu also pointed out in the interview that the emergence of DeepSeek at the beginning of this year completely triggered the market's "re-valuation" trend for "Chinese tech assets." DeepSeek is a high-performance, low-cost AI large model competing with OpenAI's ChatGPT, and also the Chinese AI startup company that created this large model.

Jerry Wu stated that from the AI-triggered Chinese AI investment boom to the "Chinese tech stock investment frenzy" covering biotechnology, robotics, semiconductors and other fields, momentum in the Chinese market is strengthening across the board.

Benjamin Low, Senior Investment Director at international investment institution Cambridge Associates, said his team has received over 30 client inquiries about finding China funds this year, forming a stark contrast with the 2023 trough when there were virtually no inquiries about China-focused mandates.

He stated that many non-Asian investment institutions plan to visit China for on-site investment opportunity investigations later this year, with some making their first trip to China since the COVID pandemic.

Japanese international financial giant Nomura recently raised target levels for the MSCI Asia Pacific ex-Japan Index and MSCI China Index, and the institution stated it maintains a "strategic overweight" stance on Chinese stocks, particularly favoring semiconductors and AI-related technology stocks.

Driven by exploding global AI infrastructure demand, China's A-share market computing infrastructure sector and "domestic chip substitution" related technology stock sectors have become market focuses amid China-US competition, with multiple AI computing and chip leading stocks repeatedly hitting new highs while performance simultaneously surged.

As Chinese internet and cloud computing giant Alibaba announced results exceeding market expectations and demonstrated an ambitious "artificial intelligence super blueprint," it further ignited the tech stock investment boom in Chinese equity markets, driving Chinese tech stocks favored by global capital this year to maintain strong upward momentum. This AI super wave is comparable to the 2023 US tech stock "mad bull" market.

After announcing results, Alibaba's Hong Kong shares surged over 17% on the day results were released, with market value soaring by over $50 billion.

Cambricon, betting on the ASIC route, is arguably the hottest stock in the Chinese market currently, up 110% year-to-date. Wall Street major Goldman Sachs raised its target price for Cambricon, the "Chinese AI chip leader" and "domestic chip substitution" pioneer, again just one week later.

In its latest report released on September 1st, Goldman Sachs raised Cambricon's 12-month target price from RMB 1,835 to RMB 2,104, an increase of 14.7%, while maintaining a "Buy" rating. The latest target price implies 41% upside potential for this stock that has repeatedly hit new highs this year compared to its August 29th closing price.

VeriSilicon, focused on chip IP, also received bullish views from Goldman Sachs, which significantly raised VeriSilicon's 12-month target price from RMB 193 to RMB 220, maintaining a "Buy" rating, reflecting its AI order-driven continuous strong growth momentum with over 20% upside potential from current stock price. Goldman Sachs also raised VeriSilicon's net profit forecasts for 2027-2030.

At the index level, Goldman Sachs predicts the MSCI China Index, which includes Chinese core assets such as Alibaba, Tencent, Kweichow Moutai, and Yangtze Power, has potential upside of up to 10%, maintaining a target level of 90 points. Goldman Sachs expects the CSI 300 Index, which has experienced significant gains, still has potential investment returns of about 10%, with a target level of 4,900 points, significantly raised from the previous 4,500 points.

Goldman Sachs recently stated that a "major driving force" behind the stock market rise remains China's retail investor group with excess savings, and from a longer-term perspective, net long positions in Chinese stock markets remain at relatively low levels, so the low valuations and increasingly active trading volumes of Chinese stock markets deserve key attention.