Why China’s AI Surge May Eclipse US Tech – Hedge Fund Secrets Inside

• You can capture double‑digit returns by adding overlooked Chinese AI and semiconductor stocks.
• Mid‑cap data‑center firms like GDS and VNET offer valuations impossible to find in the US.
• China’s new 50% local‑content rule creates winners such as Tongfu Microelectronics and ACM Research.
• 2024 could unleash a wave of Chinese tech IPOs – from Baidu’s Kunlunxin to Alibaba’s T‑Head.
• Samsung’s dormant foundry business may become the next Taiwan Semiconductor, powered by Elon Musk’s chip orders.

You’re missing the biggest tech upside of the decade if you’re still staring at Wall Street.

While most investors reflexively reach for US‑listed chip and AI names, hedge‑fund veteran Beeneet Kothari of Tekne Capital is betting that the real prize pool lies across the Pacific. His $1.5 billion, high‑conviction portfolio has outperformed the MSCI World index by double digits for two straight years, and the secret sauce is a deep‑dive into China’s AI build‑out, data‑center boom, and a nascent IPO frenzy.

Why China’s AI Edge Beats the US: The Supply‑Side Advantage

China’s state‑driven approach lets it marshal power, chips, data‑centers, and cooling infrastructure at a scale the US can’t match. Kothari points out that the biggest risk for US AI players is the potential oversupply of compute as massive capital has already been poured into GPU farms. In contrast, Chinese capital has been scarce, meaning today’s supply constraints are likely to ease without a glut.

Another differentiator is focus. U.S. labs chase artificial general intelligence (AGI) and super‑intelligence, often at the expense of immediate revenue. Chinese firms, operating in a recessionary environment, prioritize profit‑generating models – a pragmatic lens that translates into faster commercial roll‑outs.

Hidden Gems: Mid‑Cap Chinese Data‑Center and Chip Companies to Watch

Data‑center real estate is the hottest asset class in tech. Two listed players—GDS Holdings and VNET Group—combine for a market cap of roughly $12 billion, a scale that dwarfs any U.S. data‑center stock under $10 billion. Tekne Capital is one of the top five shareholders in GDS, signaling conviction in the sector’s growth trajectory.

Beyond data centers, the chip supply chain is being reshaped by companies like Tongfu Microelectronics (market cap $10 billion) and ACM Research. Both sit at the intersection of advanced packaging and capital‑equipment, benefitting from a new law that mandates 50 % of domestically produced semiconductors use local components.

Key metrics illustrate the upside: Tongfu trades at ~13 × EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) while delivering >20 % annual revenue growth. By comparison, mature Western peers hover around 11‑12 × EBITDA with slower growth, highlighting the valuation head‑room in China’s younger firms.

Semiconductor Supply Chain Realignment: Tongfu, ACM Research, and the 50% Local Content Law

The Chinese government’s push to align its 35 % global semiconductor consumption with a 6 % production share has accelerated localisation. The 50 % local‑content rule forces manufacturers to source a substantial portion of inputs domestically, creating a captive market for companies that can supply those components.

Investors should watch:

• Tongfu Microelectronics – joint‑venture partner of AMD since 2016, positioned in advanced packaging.
• ACM Research – provider of wafer‑cleaning equipment, a critical step in chip fab yield improvement.
• VNET Group – operates tier‑1 data‑center facilities, benefitting from AI‑driven demand spikes.

These firms are not just beneficiaries of policy; they are integral to a supply chain that the Chinese state is actively fortifying.

IPO Flood Forecast: Baidu’s Kunlunxin, Alibaba T‑Head, CXMT, and Beyond

2024 is set to be the year of Chinese semiconductor IPOs. Baidu’s AI‑chip unit Kunlunxin could debut at a valuation north of $30 billion, while Alibaba plans to spin out its T‑Head chip business. CXMT, China’s largest memory maker, is also slated for a public offering.

Beyond chips, mega‑cap IPOs loom: Ant Group, ByteDance, Shein, and Didi are all expected to list. ByteDance alone is estimated at over $1 trillion, yet many global investors remain unaware of its scale.

Each listing offers a two‑fold catalyst: fresh capital for capacity expansion and a price‑discovery event that can unlock hidden multiples for related supply‑chain stocks.

Beyond Asia: Samsung’s Foundry Revival and Brazil’s Emerging‑Market Tech Play

While China dominates the narrative, Kothari also flags Samsung Electronics as a contrarian gem. The memory business is battered, but Samsung’s foundry division—now the world’s second‑largest after Taiwan Semiconductor Manufacturing Company (TSMC)—has a pending $17 billion chip purchase commitment from Elon Musk’s ecosystem (SpaceX, Tesla, xAI). Samsung is also building fabs in Texas, mirroring Apple’s impact on TSMC.

In Latin America, Brazil’s equity market trades at roughly 6 × earnings, the cheapest among major economies. A shifting central‑bank stance and a commodity boom are setting the stage for corporate buybacks and dividend hikes. Tekne Capital holds StoneCo, a fintech poised to return over a third of its market cap to shareholders within two years.

Investor Playbook: Bull vs. Bear Scenarios

Bull Case

• Chinese AI and semiconductor firms benefit from state‑backed capital, policy incentives, and an undersupplied compute market.
• Upcoming IPOs inject fresh equity, fund capacity expansion, and provide valuation anchors for the supply chain.
• Geopolitical tensions ease, allowing continued access to Nvidia’s legacy chips, which bridge China’s technology gap until 2028‑30.
• Samsung’s foundry receives a multi‑billion commitment from Musk’s conglomerate, unlocking a growth runway comparable to TSMC’s Apple partnership.

Bear Case

• U.S. export controls tighten, cutting off critical chip technology and stalling China’s self‑sufficiency timeline.
• Domestic Chinese chip designs fail to achieve performance parity, leaving the sector vulnerable if the Nvidia bridge disappears.
• Valuation compression in Chinese equities due to a sudden macro‑economic slowdown or policy reversal.
• Samsung’s foundry expansion faces cost overruns or insufficient order flow beyond Musk’s ecosystem.

Investors should balance exposure: allocate a core position to diversified mid‑cap Chinese data‑center and semiconductor names, supplement with a satellite bet on Samsung’s foundry revival, and keep a tactical window for Brazil’s undervalued tech equities.