The difference between Chinese and U.S. stocks is only getting clearer. The S & P 500 fell into correction on Thursday for the first time since 2023 . Meanwhile, the MSCI China index has surged double digits in its best start to a year in history, largely thanks to artificial intelligence, according to Goldman Sachs. Driving Chinese market gains are what Bank of America’s Michael Hartnett calls the “Fab Four” — Baidu , Alibaba , Tencent and Xiaomi . The tech companies’ stocks are all traded in Hong Kong; Baidu and Alibaba also have U.S.-listed shares. Invoking the popularity of The Beatles reflects the momentum with which the Chinese tech giants have risen on AI hopes. Alibaba and Tencent have in recent weeks both released AI models they claim rival those from DeepSeek and OpenAI, while the Chinese tech giants each have massive user bases given their respective dominance in the country’s e-commerce and social media industries. Alibaba on Thursday unveiled an updated version of its 200 million-user Quark browser with faster AI-generated results. Baidu has built its own AI model called Ernie that it’s been rolling out across its cloud storage and content generation apps. The company also develops autonomous driving and operates robotaxis across China. Xiaomi has downplayed its AI capabilities, instead focusing on its popular SU7 electric car , a swath of smartphones and internet-connected home appliances. The stock is on pace for its ninth-straight month of gains. It’s a “Year of International – long China & EU,” Hartnett said, saying the U.S.’s ” Magnificent 7 ” is now the “Lagnificent 7.” The CNBC Magnificent 7 Index — which includes Alphabet , Amazon , Apple , Meta Platforms , Microsoft , Nvidia and Tesla — is down about 12% year to date as of Friday. Even as of March 6, the DeepSeek news had triggered $3 trillion in market cap losses for the Magnificent 7, while doubling the market cap of the Fab Four to $1.6 trillion, according to Bank of America. Since Chinese startup DeepSeek’s AI breakthrough hit markets in late January, Beijing has ramped up its supportive signals on Chinese tech, while investors have become more interested in AI announcements from Alibaba and other Chinese companies. Initial Chinese stock gains have already started to fuel expectations that the local market will see its own version of the AI-driven rally that the U.S. saw in the last two years. “In the U.S., the AI rally rotated from AI infrastructure to AI enablers and then AI adopters. It’s a similar pattern in China,” HSBC analysts said earlier this month. They noted a “large valuation gap” between Chinese AI plays versus their U.S. peers, which could narrow as growth and profits pick up. Investors inside and outside China are getting more interested. Hong Kong stocks, particularly Alibaba and Tencent, saw net buys from mainland Chinese investors reach a record high on Monday . For international institutions, short-term hedge funds led most of the buying in February, while interest from longer-term investors has started to emerge this month, Robin Xing, chief China economist at Morgan Stanley, told reporters Wednesday in Beijing. “As concerns about the U.S. economy and U.S. markets [grow], their interest may increase,” he said in Mandarin, translated by CNBC. But he cautioned it’s not a given, and said research indicates U.S. consumers may not feel much impact until a 20% drop in stocks. — CNBC’s Michael Bloom contributed to this report.
