Source: Barron's
Author: Jack Denton
Goldman Sachs' chief China equity strategy team noted in a report that AI has changed the game for Chinese technology stocks, with a slow bull market anticipated for Chinese tech stocks by 2026.
This year has been an exceptional one for Chinese equities, particularly for technology stocks such as$Alibaba (BABA.US)$. Goldman Sachs noted that while there are some aspects to be mindful of, investors can anticipate the continuation of this bull market.
Alibaba’s American Depositary Receipts (ADRs, the company's primary form of U.S.-listed securities) have surged over 75% this year, significantly outperforming other Chinese tech stocks like$S&P 500 Index (.SPX.US)$。$NetEase (NTES.US)$、$Baidu (BIDU.US)$, which have also performed strongly with share price increases exceeding 50%.
After years of regulatory pressures and economic headwinds, China's technology sector has seen a remarkable rebound. Alibaba ADRs are currently trading around $150, representing only half of their peak at the end of 2020 but reaching heights once unimaginable compared to the lows near $60 in 2022.
Artificial intelligence is the central theme driving the rise in Alibaba and other companies' stock prices. This trend has propelled$NVIDIA (NVDA.US)$to become the world’s first company to reach a market value of $5 trillion, while also boosting the rise of Chinese enterprises in this rapidly growing technological field.
In a report issued on Monday, a team led by Kinger Lau, Goldman Sachs’ chief China equity strategist, stated: 'Artificial intelligence has transformed the game for Chinese technology stocks.' They provided a detailed summary of insights drawn from the Chinese market in 2025 and made several predictions for 2026, including that Chinese technology stocks would continue to rise, albeit at a varying pace.
They wrote: 'Achieving positive returns for two consecutive years may signal the arrival of a slow bull market. We expect this bull market to persist, but at a slower pace. We project that the Chinese stock market could rise by 38% by the end of 2027... This scenario suggests that the stock market cycle is transitioning from the ‘expectation phase’ to the ‘growth phase.’'
Goldman Sachs noted that another lesson from the Chinese market over the past year is that improvements in the trade environment—such as the lower-than-expected impact of U.S. tariffs—have compensated for the inadequacies of domestic fiscal policy. They also added that despite headwinds in trade, the pace of 'China going global' continues unabated.
Goldman Sachs further pointed out that consumers are still spending, albeit with consumption hotspots spread across different sectors of the Chinese economy—and inflation remains a key trend for the future, with policies expected to continue guiding prices toward healthy growth.
The team also added that China’s latest five-year plan 'may have redefined investors’ strategies for Chinese equities,' as technology has been designated as one of the top development priorities leading up to 2030.
Despite the presence of risks, the Goldman Sachs team stated that 'China presents investment value,' and 'the benefits of diversified allocation are becoming increasingly evident.' The team also expressed optimism about the technology and artificial intelligence sectors closely tied to Alibaba.
'Breakthroughs in the field of artificial intelligence have reshaped the narrative around technology stocks,' they wrote. 'While the valuation of China's AI tech ecosystem has been repriced, it remains relatively inexpensive compared to the U.S., especially considering China’s growing potential in capital expenditure and its focus on monetizing AI through practical application scenarios.'
They also noted that the technological arms race between China and the U.S. 'could give rise to a group of Chinese companies with structural advantages,' particularly in niche areas—such as sectors where China holds cost advantages in electricity, human capital, and other resources, as well as industries like semiconductor design and manufacturing that receive strong government support.
For Chinese stocks listed abroad such as Alibaba, which have experienced years of stagnation, this brings new expectations for investors in 2026.
Editor/Rocky