China's Terrific Ten Are Beating Mag 7. Will the Current Momentum Carry On?

China's Terrific Ten, a group of leading tech companies, have been outperforming the Mag 7, a collection of prominent U.S. tech giants, in recent months. This article explores the factors driving this momentum and examines whether it can be sustained in the long term.

The key factors driving the outperformance of China's Terrific Ten include government support and policy initiatives, innovation and technological breakthroughs, growing domestic demand, and investment from global hedge funds. The Chinese government has been actively promoting high-tech industries, leading to increased investment and innovation in these sectors. For instance, the government has pledged to accelerate industrial upgrading in 2023 and increase the global competitiveness of Chinese manufacturers in new technologies (Source: Ministry of Industry and Information Technology). Additionally, Chinese companies have made significant strides in technological innovation, leading to breakthroughs in various fields. For example, DeepSeek, a Chinese AI firm, launched its "reasoning model" R1 on January 20, 2023, which has garnered global attention and fueled investor enthusiasm (Source: Global Times).

Growing domestic demand and investment from global hedge funds have further boosted the performance of Chinese tech stocks. The increasing wealth and consumption of the Chinese middle class have created a large and growing domestic market for tech products and services, driving the growth of Chinese tech companies and helping them achieve economies of scale. Global hedge funds have been snapping up Chinese stocks, particularly in the tech sector, due to the potential for high returns and the growing influence of Chinese tech companies on the global stage (Source: Reuters).



However, the current valuations of China's Terrific Ten are not directly comparable to their historical averages or those of the Mag 7, as the data for the T10 is not available. The Mag 7's market capitalization has been volatile, with a 52-week low of $6.83 trillion and a 52-week high of $12.68 trillion. Their 50-day average market capitalization is $9.13 trillion, and their 200-day average is $8.72 trillion. The Mag 7's P/E ratio is 25.93, and their forward P/E ratio is 1.76. Their EPS is $4.81, and their forward EPS is $9.87.

Geopolitical tensions and regulatory risks play a significant role in influencing the momentum of China's Terrific Ten. The ongoing U.S.-China trade disputes have affected the supply chain and production costs of many Chinese companies, including those in the Terrific Ten. The implementation of the Hong Kong National Security Law in 2020 led to concerns about the political environment and regulatory risks for companies operating in the region, including Alibaba and Tencent (Source: South China Morning Post). In the coming months, geopolitical tensions and regulatory risks are likely to evolve as U.S.-China relations continue to engage in diplomatic and trade negotiations, potentially easing or escalating tensions, affecting the momentum of the Terrific Ten.

In conclusion, China's Terrific Ten have been outperforming the Mag 7 due to various factors, including government support, technological innovation, domestic demand, and investment from global hedge funds. However, the sustainability of this momentum depends on various factors, such as the global economic environment, geopolitical tensions, and the ability of Chinese companies to maintain their competitive edge in the face of increasing international competition. Investors should closely monitor these developments and assess their impact on individual companies within the Terrific Ten when making investment decisions.