China Tech ETFs Surge As DeepSeek-Led AI Boom Fuels Bull Market - Alibaba Gr Hldgs (NYSE:BABA), Baidu (NA

As China's tech sector stages a strong comeback, investors are increasingly looking at ETFs as a way to gain exposure to this space.

Whether it's internet giants, broad technology firms, or a mix of leading Chinese companies, ETFs offer a diversified way to take a bite of surrounding China's innovation boom.

Here are three ETFs that provide investors with access to China's rebounding tech sector.

Also Read: AI ETFs In Focus As Alibaba Challenges DeepSeek With New Model

Invesco China Technology ETF (NYSE:CQQQ): This ETF provides concentrated exposure to China's tech giants. It also mirrors the FTSE China Incl A 25% Technology Capped Index, which includes major players like Tencent (OTC:TCEHY), PDD Holdings (NASDAQ:PDD), and Baidu (NASDAQ:BIDU), companies at the forefront of AI, e-commerce, and cloud computing. Recently, Baidu Cloud and Tencent Cloud integrated DeepSeek’s AI model into their platforms. With DeepSeek's upward rise, both companies witnessed a surge, and pulled CQQQ up along with it. The ETF has rallied 13.5% year-to-date and 45% in the past year.

KraneShares CSI China Internet ETF (NYSE:KWEB): This ETF provides exposure to China's big internet names, mirroring the CSI Overseas China Internet Index. The fund’s holdings include major players like Alibaba (NYSE:BABA), Tencent, and Baidu. Alibaba's latest AI model has reportedly outperformed Meta Platforms (NASDAQ:META) Llama and DeepSeek's V3 in various tests. This led the company's stock to surge, lifting KWEB along with it. As Wall Street brokers turn more optimistic on China's valuation discount disappearing, KWEB stands to benefit from increased foreign inflows. The ETF has grown 12.6% year-to-date and 32.5% in the past year.

iShares MSCI China ETF (NASDAQ:MCHI): This ETF provides a broader exposure while maintaining access to substantial allocation to technology stocks. China's largest and most liquid companies, including Tencent, Alibaba, Meituan and Xiaomi are among MCHI’s holdings. HSBC recently noted that the valuation gap between China and emerging markets may narrow as global funds flow into Chinese stocks. Deutsche Bank echoed the sentiment.

Market Overview

The Hang Seng Tech Index is currently trading at 17 times forward earnings estimates, significantly cheaper than the Nasdaq 100's 27 times valuation, according data compiled by Bloomberg. This suggests ample room for price appreciation, making MCHI an appealing option. The ETF has climbed 8.32% this year thus far, and 31.25% in the past 12 months.

After years of regulatory headwinds and economic uncertainty, China's tech sector is making a roaring comeback. A surge in AI innovation and favorable valuations have propelled the Hang Seng Tech Index into a bull market, with Wall Street analysts increasingly bullish on the space, said Bloomberg in a report. Heavyweights like Xiaomi and Alibaba are among the companies leading the rally.

Meanwhile, Bloomberg reported that analysts at Deutsche Bank argue that China's innovation-driven resurgence will force global investors to turn sharply toward the nation's stocks, despite geopolitical risks.

Favorable valuations have helped reinforce the upbeat sentiment. As Deutsche Bank's Peter Milliken put it in a research note: "We think 2025 is the year the investing world realizes China is outcompeting the rest of the world."

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