①UBS Group analysts are optimistic about Chinese technology stocks, believing they will benefit from increased capital expenditure and advancements in artificial intelligence capabilities by 2026; ②Despite recent declines in Chinese tech stocks due to turbulence in the U.S. artificial intelligence sector, UBS Group expects Chinese tech giants to announce plans to expand their spending.
Cailian Press, February 25 (Editor Huang Junzhi) Despite a recent decline in Chinese technology stocks due to volatility in the U.S. artificial intelligence (AI) sector, UBS Group analysts remain bullish and plan to increase allocations to Chinese technology stocks, as they believe strong earnings, attractive valuations, and progress in artificial intelligence could yield returns by 2026.
UBS Group stated that China's technology industry will benefit from increased capital expenditure and advancements in artificial intelligence capabilities by 2026.
The bank’s analysts further explained that the current capital expenditure of Chinese tech giants is only a fraction of that of their U.S. counterparts, and they anticipate that domestic hyperscale data centers will announce plans to expand spending in the upcoming earnings season.
UBS Group analysts said, 'Although U.S. investors have recently begun penalizing companies for accelerating capital expenditure growth, we believe China is still in a cycle where investors reward companies committed to capital expenditure growth.'
Concerns over excessive expansion of AI spending in the U.S. have spread, causing Chinese technology stocks—especially those listed in Hong Kong—to fall by approximately 20% from their October highs. Recently, fears that AI will disrupt traditional software have intensified, particularly following the release of a series of new AI tools by startup Anthropic, putting additional pressure on the sector.
However, on the other hand, in recent months, a group of smaller Chinese artificial intelligence startups—such as $KNOWLEDGE ATLAS (02513.HK)$、 $MINIMAX-WP (00100.HK)$ and Deepseek—have released a series of cutting-edge artificial intelligence models, boosting optimism about the long-term prospects of China's AI sector.
UBS Group analysts stated, 'We expect China’s AI sector to experience even more robust growth by 2026, including stronger foundational models and innovative applications.'
UBS Group increased the weighting of $TENCENT (00700.HK)$ in its portfolio by three percentage points, and also raised the weightings of $BILIBILI-W (09626.HK)$ , Zhipin Technology Co., Ltd., $MEITUAN-W (03690.HK)$ (Meituan, 03690.HK), $NTES-S (09999.HK)$ and $TAL Education (TAL.US)$ by one percentage point each. At the same time, UBS reduced the weighting of $Vipshop (VIPS.US)$ in its portfolio by three percentage points, and decreased the weighting of $NEW ORIENTAL-S (09901.HK)$The weight has decreased by 2 percentage points, to$BABA-W (09988.HK)$ 、 $KUAISHOU-W (01024.HK)$ and $XIAOMI-W (01810.HK)$The reduction in holdings was relatively small.
UBS Group also holds a more positive outlook on China's gaming industry, believing concerns about AI disruption have been overstated. In early 2026, Google's launch of 'Project Genie'—a world-class model for building interactive virtual worlds—sparked fears that lower entry barriers would intensify competition, pressuring stock prices in the sector thereafter.
However, UBS Group refuted this view, stating that strong user insights, operational capabilities, and intellectual property reserves remain key advantages that are difficult for small developers to replicate. The bank noted that top gaming companies are more likely to benefit from AI trends rather than be adversely affected by them.
Editor/Rice
