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Yulu Ao

China’s push for tech self-reliance is opening new investment opportunities in artificial intelligence stocks, but stretched valuations and geopolitical tensions make the sector an increasingly risky bet, according to Bank of America.
The country’s tech firms are catching up with overseas rivals while a wave of high-profile listings has broadened investment opportunities, Winnie Wu, head of Asia-Pacific equity strategy research and co-head of China equity research at Bank of America, said in a media briefing in Hong Kong on Tuesday.
“Localisation is no longer just a policy ambition,” Wu said. “The domestic players are closing the gaps in technology standards, gaining market share [and] making tangible progress.”
The bank divided Chinese AI-related stocks into three broad groups, each offering a different risk-return profile.
Semiconductor equipment makers, foundries, memory-chip companies and AI accelerator developers could benefit from both AI growth and Beijing’s drive for tech self-reliance and import substitution, Wu said.

Their earnings were relatively insulated from a potential slowdown in US AI investment because they mainly served the domestic market, she added.
Valuations, however, had become a concern, with some stocks trading at between 50 and 150 times earnings even after recent declines, while investor positioning had become relatively crowded, according to Wu.
A second group was composed of Chinese suppliers benefiting from the global AI infrastructure buildout, including makers of optical components, printed circuit boards and other hardware, which trade at lower valuations of around 20 to 40 times earnings, according to the bank.
However, they faced additional risks from their greater exposure to US AI capital expenditure and potential restrictions on Chinese technology, Bank of America added.
Investors were more cautious towards a third category – AI applications from large-language models to humanoid robots and physical AI edge devices – due to the absence of a clear “killer app”, low switching costs and emerging price competition, Wu said.
The assessment comes as investors await a meeting between Chinese President Xi Jinping and US President Donald Trump in Washington this week, with trade, AI and tech export restrictions on the agenda.
Xi will visit the US from Wednesday to Friday and meet Trump on Thursday, their second face-to-face meeting this year.
Wu said US restrictions on Chinese technology might have limited short-term impact on earnings since Chinese companies remained dominant suppliers for some US companies, but regulatory uncertainty could weigh on their valuations.
“Market expectation is quite low, so there is not much room for disappointment,” Wu said.
Separately, Bank of America forecast that China’s AI capital expenditure would rise from US$90 billion in 2025 to US$330 billion by 2030, as investments in computing infrastructure continue to drive demand in power equipment, energy storage and other parts of the supply chain.


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The nation’s tech firms are catching up with overseas rivals while a wave of high-profile listings has broadened investment opportunities


The nation’s tech firms are catching up with overseas rivals while a wave of high-profile listings has broadened investment opportunities.


China’s AI self-reliance presents opportunities but valuations, geopolitics are risks: BofA

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The nation’s tech firms are catching up with overseas rivals while a wave of high-profile listings has broadened investment opportunities

The nation’s tech firms are catching up with overseas rivals while a wave of high-profile listings has broadened investment opportunities