Hedge funds betting on China’s technology sector in 2025 delivered exceptional returns, with some managers achieving gains exceeding 50% as the country’s AI industry defied skeptics and kept pace with Western competitors. Despite widespread concerns at the start of 2025 about investing in China—including fears over a protectionist US administration, a struggling domestic real estate market, and the potential TikTok ban—the reality proved far more favorable for investors willing to take the risk.
Bridgewater’s China Total Returns fund generated an impressive 34.2% return on its $92 billion in assets under management, while Tekne Capital, managed by Beeneet Kothari, a former lieutenant of billionaire Stanley Druckenmiller, surged more than 50% last year. Kothari’s $1.5 billion firm invested in Chinese companies including DiDi Global, recruiting firm Kanzhun, and data-center builder GDS. Other standout performers included Pinpoint’s China-focused strategy with over 24% returns, George Jiang’s Golden China fund with close to 33%, and Epimelis Capital’s China-centric strategy delivering 35% returns.
The Chinese AI scene emerged as a key driver of this success, with startup DeepSeek leading the charge and demonstrating that Chinese AI development is keeping pace with Western peers. This development challenged the prevailing narrative that American companies had surged decisively ahead in artificial intelligence development. Adding to the positive momentum, the US government announced Tuesday that Nvidia will be permitted to sell its powerful H200 chips to Chinese companies, a significant policy shift that could further accelerate China’s AI capabilities.
ByteDance, the parent company of TikTok, became more valuable than ever after selling a majority stake in its US operations, with HSG (formerly Sequoia China) valuing the company between $350 billion and $370 billion. The Chinese government’s focus on economic stimulus led public companies to significantly increase their buybacks, further supporting market performance. The average China-focused hedge fund returned close to 18%, according to Hedge Fund Research, substantially outpacing the industry average of 10.7%. Looking ahead to 2026, investors will closely monitor the volatile US-China relationship, particularly around chip trade agreements and any indication of potential Taiwan invasion plans.
Key Quotes
the headwinds facing the country made strong companies very cheap
Beeneet Kothari of Tekne Capital explained to Business Insider why his firm invested heavily in China despite widespread concerns. This contrarian view proved prescient as his fund returned over 50%, demonstrating how market pessimism created significant value opportunities in Chinese tech and AI companies.
Our Take
The DeepSeek development is particularly noteworthy as it challenges the narrative of inevitable Western AI supremacy. While much attention has focused on OpenAI, Anthropic, and Google, China’s AI ecosystem has quietly built competitive capabilities despite chip restrictions. The Nvidia H200 approval represents a pragmatic shift in US policy—recognizing that complete technological decoupling may be neither feasible nor beneficial. For the AI industry, this means intensified global competition, which could accelerate innovation but also fragment standards and governance frameworks. The exceptional hedge fund returns suggest sophisticated investors recognized that geopolitical fears had created a significant disconnect between China’s actual AI capabilities and market valuations. As we move into 2026, the US-China AI competition will increasingly define the technology landscape, with implications for everything from semiconductor supply chains to AI safety standards.
Why This Matters
This story represents a significant shift in the global AI competitive landscape and challenges the assumption of Western AI dominance. DeepSeek’s emergence as a credible competitor to Western AI leaders demonstrates that China’s technological capabilities remain formidable despite export restrictions and geopolitical tensions. The US decision to allow Nvidia H200 chip sales to Chinese companies signals a potential recalibration of technology policy that could accelerate China’s AI development and intensify global competition.
For investors and businesses, this highlights the risks of underestimating China’s AI ecosystem and the potential rewards for those willing to navigate geopolitical complexity. The exceptional hedge fund returns—some exceeding 50%—demonstrate that market pessimism created significant opportunities. As AI becomes increasingly central to economic competitiveness, the US-China AI race will shape everything from chip manufacturing to data center infrastructure to consumer applications. The ByteDance valuation surge to $370 billion underscores how AI-powered platforms continue to generate enormous value, while the chip trade dynamics will determine which nations can build cutting-edge AI systems in the coming years.
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Source: https://www.businessinsider.com/hedge-funds-china-performance-2025-2026-1