China's AI Surge Fuels ETF Gains: Baidu, Alibaba Lead The Way

The Hang Seng Index on Monday was affected by worldwide signals, especially the soon-to-be-held U.S. Federal Reserve meeting and the announcement of Hong Kong’s February 2025 unemployment rate.?The index closed nearly 1% higher. This?upbeat?action?came?after China’s?better-than-forecast?retail sales?figures.

The Hang Seng TECH Index also?increased?by?over 2% on March 14th,?and remained largely flat Monday, reflecting the strength in the?tech?sector. Market sentiment?seemed?to be cautiously optimistic,?waiting?for?more?cues?from the Fed and the local unemployment?figures.?

Also Read: Nvidia Faces New AI Challenge As Chinese Start-Up Unveils Framework To Cut Reliance On Its GPUs

There’s growing investor interest in ETFs tracking Chinese AI stocks as leaders like Baidu (BIDU) and Alibaba (BABA) continue to lead the charge in AI technology. Recent news reports showcase that there’s a lot of excitement building up China’s emerging sector in artificial intelligence.

Investors are anticipating a chance to benefit from China’s tech success story as it competes on a global scale. China is blowing up thanks to tech, and there’s potential for people who invest.

For American investors looking to get a piece of China’s growing AI industry, ETFs following China’s AI sector are becoming an increasingly appealing choice. A few of the prominent ETFs with large exposures to Baidu (BIDU), Alibaba (BABA), and other Chinese AI companies include:

KraneShares CSI China Internet ETF (KWEB) : One of the most popular China-tracking ETFs, KWEB offers exposure to large Chinese internet and technology giants, such as Baidu (BIDU) and Alibaba (BABA).

iShares MSCI China ETF : This China ETF covers broad-based AI leaders and other Chinese blue-chip stocks, such as PDD Holdings (PDD) .

Invesco Golden Dragon China ETF (PGJ) : A U.S.-listed ETF that follows U.S.-listed Chinese firms, some of which are leading companies in AI development like Alibaba (BABA) and Baidu (BIDU).

Baidu’s AI Breakthroughs

Baidu (BIDU) brought two new AI models to the market that highlight the company's push for leadership in the space. Over the weekend, Baidu (BIDU) introduced Ernie X1, a reasoning model that competes with DeepSeek R1 but at half the price. Additionally, the company launched Ernie 4.5, a multimodal foundation model that Baidu (BIDU) claims outperforms OpenAI's GPT-4.5 in multiple benchmarks while costing just 1% of its counterpart's price.

As part of its AI?push, Baidu (BIDU) is?releasing?its Ernie Bot?publicly?for?the?first?time?ahead of schedule and intends to roll out its most recent?models into its product ecosystem, including Baidu Search, China’s?leading?search engine. These steps make Baidu?a?strong?competitor?in China’s AI?competition?and could?make?it?more?appealing?to ETFs with?high?exposure to the stock.

Also Read: What’s Going On With Baidu Shares Monday?

Alibaba’s AI Surge

At the same time, Alibaba (BABA) is also?creating?ripples?in the AI?world?with its Quark AI assistant,?which?runs?on?its?in-house Qwen reasoning AI model. Quark has?been well-received?on?Chinese social media and is?viewed?as a potential?“killer app”?in the AI?space.

In a dramatic move to deepen its technology advantage, Alibaba (BABA) said last month it will invest $52 billion in cloud computing and AI infrastructure over the next three years. This is the biggest computing project ever funded by a single private firm in China and represents the country’s overall drive to push the envelope for the top position in AI development.

Economic Rebound And AI Investments Drive Market Optimism

China’s economy is shifting from pandemic-induced austerity to pro-growth policies to bolster the country’s crucial sectors. China?has?set?its?2025?GDP?growth?goal?at 5%,?with?an emphasis?on economic stabilization,?like?reviving?the real estate? sector after?the Evergrande crisis.

This?revival?is?evident?in the Hang Seng Index, which?recorded?its first?year-on-year?gain in 2024?after?2021 and has continued to rally in 2025?with?a 23% year-to-date return. The renewed?optimism in the market, along with the fervent AI investment, is making China’s?technology?sector?more?desirable?to foreign investors.

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