Chinese stocks experienced a remarkable rally in February, largely driven by the unveiling of DeepSeek’s new open-source AI model and Unitree Robotics’ advancements in robotics technology. These innovations captivated investors, propelling the MSCI China Index to an impressive 12% increase in February, with momentum continuing into March. The rally was largely driven by stocks expected to benefit from the widespread adoption of AI and robotics technologies.
Chinese Tech Sparks Investor Re-evaluation
Zheng Fang, founder of Hong Kong-based Keywise Capital Management Ltd., believes that the success of DeepSeek and Unitree Robotics is prompting a re-evaluation of China’s technology sector. “Chinese equities may see a re-rating this year,” he said, highlighting the pivotal role these companies are playing in reshaping the nation’s technological landscape.
Several hedge funds and long-only funds have benefitted significantly from this rebound. Below is an overview of the strategies and returns of firms that capitalized on the momentum.
Triata Capital Sees Strong Returns in AI and Data Center Stocks
Triata Capital Ltd.’s China hedge fund reported a 39% return in February, fueled by strategic investments in AI software and data center stocks. CIO Sean Ho, who previously worked at Susquehanna International Group and Tybourne Capital, leveraged alternative data to guide investments. One such example was the purchase of American depositary receipts (ADRs) of data center operator GDS Holdings Ltd. in early 2024 when the stock traded at $5 to $6 per share. By February 2025, GDS shares surged above $40.
Triata, managing over $1 billion in assets, has also invested in AI software companies, including those focusing on cloud computing and text-to-video technologies.
Viridian Asset Management Profits from Equity Offerings
Viridian Asset Management posted a 6% return in February, its strongest month since its launch in August. CIO Pascal Guttieres attributed the success to strategic participation in follow-on share offerings of Chinese tech companies raising capital for expansion. Notable investments included RoboSense Technology Co., XtalPi Holdings Ltd., and Beijing Fourth Paradigm Technology Co.
Viridian’s strategy has been to capitalize on discounted share offerings, which have seen increased demand as Chinese companies once again have access to equity capital markets—a shift not seen since 2021. The firm, which manages $130 million, is expected to grow its assets to $400 million by its one-year anniversary.
Aspoon Capital’s “China ChatGPT Moment” Pays Off
Aspoon Capital Ltd. saw a 4.8% return in February and a remarkable 58% return for 2024. The firm’s success came from its investments in Chinese AI-related stocks, which the firm likened to China’s previous leap in mobile internet adoption. Aspoon believes the current rally in AI stocks is more sustainable compared to the brief surge seen in September 2024. The firm’s newsletter noted that giants like ByteDance and Alibaba Group, which are developing their own AI models, will further fuel the AI-driven market cycle in China.
Red Gate China Growth Fund Taps into Robotics and AI
The Red Gate China Growth Fund achieved an 8% return in February, driven primarily by investments in advanced manufacturing and information technology stocks. Red Gate’s research team is particularly bullish on the robotics sector, predicting that demand for robots will soon surpass that of electric vehicles and mobile phones, potentially reaching trillions of dollars.
The firm is focusing on robotics parts and components makers that can mass-produce at low costs. In the AI space, Red Gate sees Tencent’s integration of DeepSeek’s model into its WeChat app as a key development, with applications extending to e-commerce and lifestyle services.
Keywise Capital’s Strategic Investments in AI and Tech Stocks
Keywise Capital’s Penguin Development Fund rose by 5.9% in February, with gains largely attributed to Chinese tech companies. Keywise increased its holdings in Alibaba, Tencent, and Trip.com Group Ltd., which uses AI to enhance customer services. The firm also sees promising potential in Xiaomi and BYD for AI-driven transformations.
Keywise, which oversees about $2.5 billion, has seen a surge in client interest following DeepSeek’s breakthrough. Zheng Fang noted that following the AI developments, several new clients, including endowment funds from the US, Europe, and the Middle East, have expressed interest in meeting with the firm.
Conclusion
The recent surge in Chinese stocks, fueled by the advancements of DeepSeek and Unitree Robotics, signals a promising future for the nation’s tech sector. As more investors look to capitalize on the growing AI and robotics industries, funds like Keywise, Triata, Viridian, Aspoon, and Red Gate are positioning themselves at the forefront of the revolution. These companies’ success in identifying and investing in China’s rapidly evolving technological landscape suggests that the coming months could see continued growth and innovation.
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