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Emerging Markets Fund Bets Big on China AI
13 Mar
Summary
- Fund manager favors Chinese AI hyperscalers for better value.
- Chinese tech firms spend less but focus on AI applications.
- US tech giants forecast $650 billion AI infrastructure spending.
A $3.9 billion emerging markets fund is increasing its stake in Chinese artificial intelligence hyperscalers, including Tencent Holdings Ltd. and Alibaba Group Holding Ltd. The fund manager, Caroline Cai, sees these companies as undervalued with significant potential for growth. This strategy contrasts with the massive capital expenditures by US tech giants on data centers and computing power.
While US firms forecast around $650 billion in capital expenditures by 2026 for AI infrastructure, Chinese internet groups are set to spend over $240 billion by 2030. Cai highlights that China's approach focuses more on embedding AI into existing platforms, which she considers a more compelling monetization strategy.
Pzena Investment Management's fund has outperformed 97% of its peers over the last five years. Cai is reallocating funds from holdings like Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co., which she feels are less compelling after their AI-driven price surges. Despite broader investor concerns about competition in China's tech sector, Cai is betting on the value proposition of Chinese AI leaders.
