AI bubble in the US, meteoric rise in China! Earning millions in minutes, what's happening in the new year? :

News Topical, Digital Desk : AI, or Artificial Intelligence, has become the biggest buzzword in the global investment market. Interestingly, the US and China are witnessing a stark contrast in AI. While major investors in the US are warning of an AI bubble, in China, IPOs for AI and chip companies are soaring hundreds of percent on their first day, earning investors millions in just a few hours. The question is: why this contradiction, and what's next?

Let's first look at the United States. Over the past two years, AI has propelled the US stock market to new heights

Major AI-related companies played a key role in the record gains of indexes like the S&P 500 and Nasdaq. In particular, seven major tech-AI companies, known as the Magnificent Seven, drove the market upward. But now, the picture appears to be changing. Major fund managers are openly stating that while spending on AI in the United States is significant, actual profits are yet to be seen. Billions of dollars are being invested in data centers, GPUs, cloud infrastructure, and model training. The fear is that if AI fails to deliver profits, a repeat of the dot-com bust of 2000 could occur. This is why many major investors have deliberately reduced their stakes in AI stocks. Now, let's turn to China, where the story is completely different. China has made the AI and semiconductor sectors a national mission. The government is providing substantial subsidies and policy support to promote domestic chips, language models, and cloud infrastructure. As a result, IPOs for AI and chip companies in China surged 700–800% on their first day. The market valuation of some Chinese AI-chip companies has reached over 300 billion yuan. It's being said that some stocks have jumped as much as six-fold in just a few days. This is why social media and the market are abuzz with talk that Chinese investors are making millions in hours. China is also becoming attractive to investors because AI companies there are significantly cheaper in valuations than American companies—in many cases, only a quarter of their value. Research and labor costs are low, government support is strong, and the domestic market is vast. This is why many international fund managers and private equity investors are increasing their stakes in Chinese AI companies. This shift has also been reflected at the index level.

The MSCI China ETF 2025 rose nearly 29%. While the US has continued to grow, there are now more questions about valuations and profitability. Major Chinese tech companies like Alibaba and Baidu are now considered strong contenders in the AI space. They're often compared to American companies like NVIDIA, which are technologically advanced but also very expensive. So, are investors abandoning the US? The answer is no. The US remains the largest hub for AI innovation. But investors are now balancing their bets instead of placing their entire bets on one single investment. In the US, risk appears high and valuations appear high, while in China, growth appears rapid and prices appear cheap.

For the average investor... AI is a megatrend, but every megatrend comes with both bubbles and corrections. In the US, AI may now seem expensive and risky, while in China, AI is cheap and fast, but there's also geopolitical risk. It's wise not to bet entirely on a single country or story.