Goldman Sachs officially favors mainland Chinese stocks over those traded in Hong Kong. The investment bank on Wednesday lowered its rating on H shares from overweight to market weight, while maintaining an overweight rating on mainland China’s A shares as a hedge against artificial intelligence hardware. Most of China’s AI semiconductor companies and their suppliers are traded on mainland stock exchanges. For the second time in a year, Goldman announced that it is raising its 12-month target for the CSI 300 from 5,300 to 5,500. This would represent a nearly 12% increase from Tuesday’s closing price. The firm expects the high-H-share MSCI China index to have a potential upside of 11% over the next 12 months, but has downgraded the index to market weight due to the regional context. So far this year, the Hang Seng Index is up about 1.5%, and mainland China’s CSI300 index is up more than 6%. When we look at technology, the performance drop is even more pronounced. The Hang Seng Tech Index has fallen more than 5.5% since the beginning of the year, while the Nasdaq-like ChiNext has risen more than 25% during this period. “Hard Technology” This divergence reflects the Chinese government’s AI policy focus on hardware development rather than models and software applications. AI hardware has driven 85% of the $3.8 trillion rise in China’s AI stock market since the deep seek in January 2025, Goldman Sachs’ Kinger Lau said in a report. He said China accounts for at least 10% of the world’s AI market capitalization, but Chinese AI stocks are “significantly under-held by foreign investors.” The difference is also reflected in profits. “Hard tech stocks have delivered solid sales and profit growth, while large internet companies continue to struggle with profit growth,” Lau said. Highly anticipated IPOs of Chinese chips and humanoid robots are also moving into the mainland market rather than Hong Kong, and H-share AI model companies are planning to list A-shares.
