AI Reshapes the Structure of China's Stock Market; Goldman Sachs: Chinese AI Companies Have Significant Profitability Advantages, Foreign Investors Remain Underweight

AI is reshaping the structure and investment logic of the stock market. According to a Goldman Sachs research report, since the DeepSeek moment in early 2025, Chinese AI-related listed companies have created nearly $5 trillion (equivalent to nearly HK$39 trillion) in market value through stock price gains and IPOs combined, of which stock price gains contributed about $2.8 trillion and IPOs contributed about $2 trillion. AI stocks currently account for 42% of the total market capitalization of A-shares and H-shares and 57% of turnover; international investors' allocation to Chinese AI stocks remains notably underweight. Goldman Sachs noted that from a market structure perspective, the penetration of the AI theme into China's stock market has increased substantially. The share of AI stocks in the total market capitalization of all A-shares and H-shares rose from about 20% in 2024 to the current 42%, their share of turnover is as high as 57%, and their share of IPO fundraising also jumped from 4% in 2024 to 13% year-to-date in 2026. From an earnings fundamentals perspective, the divergence between Chinese AI companies and non-AI companies is equally striking. Chinese AI companies are expected to post a compound annual growth rate of 16% in earnings per share from 2023 to 2028, while non-AI companies are expected to post only 4%. The market capitalization of Chinese AI companies is about $7.6 trillion, accounting for about 10% of global AI market capitalization, about 24% of revenue, and about 14% of capital expenditure. Goldman Sachs clearly divides China's AI investment opportunities into two main lines. The first is export-oriented AI companies, covering more than 360 listed companies with a combined market capitalization of about $1.7 trillion, whose overseas revenue accounts for more than 40%. These companies are mainly concentrated in AI infrastructure and power equipment and are regarded by investors as proxies for benefiting from the Western AI capital expenditure boom. Their cumulative return from early 2025 to June 2026 reached 126%, but since the global AI stock pullback at the end of June, they have fallen 23% from their highs. The second is domestic-demand-driven domestic AI leaders, covering more than 880 listed companies that mainly serve the domestic market, with overseas revenue accounting for less than 10% and a combined market capitalization of about $3.2 trillion. This group benefits from the rapid growth of AI capital expenditure by China's hyperscale cloud service providers, the explosive growth of AI application demand, and strong policy support for technological self-reliance and self-strengthening. Compared with export-oriented companies, domestic AI leaders are more sensitive to China's AI capital expenditure trends and domestic AI policy developments, and have shown stronger defensiveness during the recent global AI stock pullback. Goldman Sachs believes that although geopolitical and trade policy risks remain, both main lines have considerable investment value, and predicts that the total market size of 21 China AI-related industries is expected to reach $3 trillion to $4 trillion by 2030, corresponding to a compound growth rate of about 28% from 2026 to 2030. Goldman Sachs also updated its "China Select AI Basket" covering 50 stocks, which has risen 33% cumulatively since its inception in February 2025. The bank pointed out that international investors' allocation to Chinese AI stocks remains notably low. Chinese AI companies account for about 10% of global AI market capitalization, but mutual funds' actual allocation to Chinese tech stocks is only about 5.8%, a significant underweight, which may provide potential room for subsequent capital inflows.