Wall Street banks turn bullish on China's A-Share market as AI boom gains momentum

Wall Street investment banks are growing increasingly optimistic about China's A-share market in the second quarter, with global investors showing renewed interest in Chinese equities fueled by the country's push into artificial intelligence (AI).

Following bullish calls from Goldman Sachs and Morgan Stanley, JPMorgan on Wednesday reaffirmed its positive outlook on China's stock market, citing improving fundamentals and emerging growth drivers such as AI-powered innovation and a rebound in consumer spending.

The bank highlighted four key factors supporting Chinese equities: relative earnings growth within Asia, AI-driven cost efficiencies spearheaded by DeepSeek, stabilization in the real estate sector, and improved liquidity aiding A-share allocations.

Tai Hui, chief market strategist for the Asia-Pacific region at JPMorgan Asset Management, told Bloomberg in a recent interview that China's AI sector will continue to "fuel optimism in the market," predicting increased corporate partnerships and broader applications of the technology.

Earlier on Wednesday, Goldman Sachs strategists Kinger Lau and Timothy Moe echoed this sentiment in a report titled "Global Marketing Feedback: China is Back." The report noted that investors remain calm over US tariff threats while viewing China's AI sector as a game-changer.

Lau projected that AI advancements could boost China's earnings per share by 2.5 percent annually over the next decade, potentially attracting more than $200 billion in capital inflows.

"Broadly, investors' interest and engagement levels in Chinese equities are arguably at the highest since the market reached its historical peak in early 2021," the report stated. "China is seen as one of the potential flow recipients, given its appeals regarding liquidity, valuations, and diversification benefits."

Meanwhile, Morgan Stanley, in a report shared with Global Times on Wednesday, forecasted greater exposure to internet and tech sectors in the Hong Kong market.

"The A-share market does not have internet exposure for historical reasons, making the Hong Kong market through Stock Connect a more straightforward option for investors seeking AI and technology innovation plays," Morgan Stanley analysts wrote.

The bank raised its year-end target for Hong Kong's Hang Seng Index to 25,800, implying a nine percent upside from current levels, while also increasing its target for MSCI China by nine percent.

China's AI ambitions were reinforced in this year's Government Work Report, which outlined plans to integrate digital technologies with the country's manufacturing and market strengths under the "AI Plus" initiative.

The rapid adoption of AI across industries in China is already evident. Official data showed that by the end of 2024, nearly 200 generative AI models had been registered and launched for public use, with more than 600 million registered users.