Q1 Hedge Fund Holdings: Increased Exposure to Chinese Tech, Reduced Bets on U.S. Magnificent Seven

TradingKey - First-quarter 2025 Form 13F filings from several top hedge funds show a shift in positioning between Chinese and U.S. tech stocks. Goldman Sachs reported that hedge funds reduced exposure to the U.S. “Magnificent Seven” stocks, while increasing allocations to Chinese technology equities.

According to a report released by Goldman Sachs on May 20, despite rising trade tensions, hedge funds increased investments in Chinese companies listed as American Depositary Receipts (ADRs). Among them, shares of Alibaba (BABA), PDD Holdings (PDD), and Baidu (BIDU) were the most favored.

The increase in hedge fund holdings of Chinese tech stocks reflects growing confidence in the long-term potential of China’s technological capabilities. 

As early as January 2025, the release of DeepSeek — an open-source AI large language model — was seen as a new chapter in China’s tech narrative, challenging the global dominance of U.S. tech giants. Since then, Wall Street analysts have increasingly turned bullish on Chinese assets.

Year-to-date in 2025, Alibaba’s U.S.-listed shares have risen approximately 48%, while PDD’s shares have gained 21%.

Their price-to-earnings (P/E) ratios currently stand at 16.2 for Alibaba and 11.2 for PDD, significantly lower than the valuations of the U.S. Magnificent Seven.

This valuation gap has made Chinese tech stocks particularly attractive to investors seeking growth potential at relatively reasonable prices.