Key Points
- Jefferies believes Chinese AI stocks have further growth potential. The valuation gap between Chinese and U.S. AI companies is still wide.
- Chinese firms are investing heavily in AI, and this is not yet fully reflected in their stock prices.
- The technology gap between Chinese and U.S. AI models is narrowing.
- Government support and upcoming IPOs could further boost the sector in 2026.
Chinese artificial intelligence stocks have had a strong run, but investment bank Jefferies believes the rally is far from over. In a new research note, analysts said the valuation gap between Chinese and U.S. AI companies remains wide, and there’s significant room for Chinese stocks to catch up.
The market value of Chinese AI stocks has already climbed by a massive $732 billion, or 88%, since the beginning of 2025. But even with that huge jump, the entire Chinese AI sector is still worth only about 6.5% of the global AI market.
Jefferies cites two key reasons it believes Chinese AI stocks have further upside. First, Chinese companies are investing heavily in AI. Their capital expenditure in the space is already about 18% of U.S. levels and is expected to rise further. The bank believes that the current stock valuations don’t fully reflect this intense level of investment.
Second, the technology gap is closing. The performance gap between the best Chinese and U.S. AI models has narrowed from 8% to 6%, driven by recent releases such as Zhipu AI’s latest model.
The Chinese government is also providing substantial support. A recent push to accelerate the use of AI in manufacturing and services has boosted investor confidence. With several large AI IPOs on the horizon, the sector could attract even more attention and investment in 2026.
While some parts of the Chinese AI industry, such as chip design, are already trading at a premium, other areas, such as cloud services and AI software, are still trading at a discount relative to their U.S. peers. This is where Jefferies sees the biggest opportunity for investors.
