Chinese Stocks' Wild Rally Hits Pause? Wall Street Still Bets Big on Favorites

Moomoo News Global joined discussion · Feb 24 22:30

After President Donald Trump announced his America First Investment Policy on weekend, fears of strained trade relations grew, sending U.S.-listed Chinese stocks tumbling. The $NASDAQ Golden Dragon China (.HXC.US)$ Index dropped over 5% on Monday, halting six weeks of gains fueled by optimism over China’s economy and the DeepSeek-R1 launch. Since January, the MSCI China Index has risen 26%, and the Nasdaq Golden Dragon China Index climbed over 25%.

Chinese Stocks' Wild Rally Hits Pause? Wall Street Still Bets Big on Favorites

Traders see the dip in Chinese tech stocks as a buying opportunity. “This is without doubt a buying opportunity for southbound investors,” said Zeng Wenkai of Shengqi Asset Management, comparing China’s AI boom to the mid- to late-2023 rally for Nvidia.

Kok Hoong Wong of Maybank Securities noted, “Some profit-taking is inevitable and could even be seen as healthy.” Looking ahead, he added, “For the rest of the year at least, this theme is here to stay. I expect foreign funds will be snapping up shares on dips today.”

Last week, analysts from several Wall Street reiterated that Chinese assets continue to offer compelling long-term investment value.

Morgan Stanley’s China Chief Economist Robin Xing and his team pointed to tech breakthroughs, private sector engagements, and Alibaba’s hefty capex plans as signs of reviving “animal spirits,” particularly in tech. They see a pivot to emerging fields like AI, robotics, and autonomous driving as China’s new economic growth engine.

Still, some analysts remain cautious, calling for stronger drivers. CICC’s strategy team warned that rapid gains have stretched sentiment and technicals. While the long-term macro story awaits confirmation, short-term momentum persists—yet sustained catalysts are crucial to avoid a potential breather.

A widely discussed chart from analyst Weniger on X reveals that China’s “Terrific 10”—including tech giants like $Alibaba (BABA.US)$, $Tencent (TCEHY.US)$, $MEITUAN-W (03690.HK)$, $XIAOMI-W (01810.HK)$, $BYD COMPANY (01211.HK)$, $JD.com (JD.US)$, $NetEase (NTES.US)$, $Baidu (BIDU.US)$, $GEELY AUTO (00175.HK)$, and $SMIC (00981.HK)$ — has delivered an 85.8% return since 2024, outpacing the Mag 7’s 81.1%.

Alibaba is leading the charge in this revaluation surge, earning robust backing from Wall Street. After the company delivered standout earnings and an optimistic outlook last week, analysts quickly boosted their price targets: JPMorgan lifted its forecast from $125 to $170, Citi from $138 to $170, and Goldman Sachs to $160.

Over the weekend, Morgan Stanley upgraded Alibaba to “Overweight” from “Equal Weight,” raising its target from $100 to $180. The firm acknowledged it had misjudged the booming AI-driven demand for Alibaba’s cloud services and the staying power of its core Taobao and Tmall operations. In a best-case scenario, AliCloud could hit $100 per share.

Analysts note that as China’s market pivots from lackluster consumption to tech innovation, Chinese internet giants like Alibaba provide “unmatched access to AI leaders and adopters.”

While Alibaba dominates AI infrastructure, Tencent is poised to lead in AI applications. Goldman Sachs sees Tencent embedding AI into daily life through its robust consumer ecosystem. On Saturday, Tencent’s first AI-native app, Yuanbao, overtook ByteDance’s Doubao to claim second place on China’s Apple free app download chart.

The data center sector is also in the spotlight. $21Vianet (VNET.US)$ and $GDS Holdings (GDS.US)$ have skyrocketed 200% and 88% this year, respectively. In a February 20 report, UBS analyst Sara Wang noted that Chinese IDC firms trade at a 25% EV/EBITDA discount to global peers—a gap that belies their superior profitability and growth potential.