Outperforming 90% of peers, the technology fund doubles down on Chinese assets, bullish on internet and hardware leaders.

A technology stock fund that outperforms its peers is taking profits on some popular US stocks and increasing holdings in Chinese assets, optimistic about investment opportunities in the Asian country's internet giants and hardware manufacturers. Since the end of last year, Liontrust Global Technology Fund has more than doubled its holdings in Chinese assets to 11%, adding new holdings in Alibaba Group Holding Limited Sponsored ADR (BABA.US, 09988) and other stocks; at the same time, the fund has reduced holdings in highly rising US technology stocks such as Micron Technology, Inc. (MU.US) and Lumentum (LITE.US). Morningstar data shows that the fund's performance this year and over the past five years has exceeded over 90% of its peers. Earlier this month, fund managers Clare Pleydell-Bouverie and Storm Uru stated in an interview in London that Agentic AI is a "killer application" that can significantly increase the return on investment for Chinese internet companies. Meanwhile, they expect the US chip and optical communication equipment sectors to enter a consolidation phase, after a significant rise in these sectors previously. This investment strategy contrasts with the current mainstream foreign investment allocation direction. This year, the Hang Seng Tech Index has fallen by 17%, while the MSCI Global Technology Stocks Index has risen by 32%. Alibaba Group Holding Limited Sponsored ADR, TENCENT (00700) stock prices have been hovering at their lows over the past year, with investors concerned about whether the substantial investment in AI can matching performance returns. In addition, concerns have been raised about new plans by state-owned companies to build data centers. Uru of Liontrust believes that the Chinese AI cloud market is not a "zero-sum game" between private and public suppliers. He said, "The market demand is huge, and we need more companies to provide computing power." These fund managers state that Alibaba Group Holding Limited Sponsored ADR and Tencent are the most capable of capturing a significant share of the profits in the Chinese AI application market, similar to Anthropologie PBC and OpenAI in the United States. They see two different AI investment opportunities: the United States leads in the most advanced "cutting-edge" models, while China has an advantage in AI systems applied to the real world. Since the release of the impressive R1 model by DeepSeek in early 2025, offering available products at affordable prices has become a distinct feature of Chinese tech companies. Apart from internet platforms, Liontrust has also invested in Eoptolink Technology Inc., (300502.SZ) which supplies light modules to NVIDIA Corporation. Uru believes that this company listed on the Shenzhen Stock Exchange has an attractive valuation, with a forward price-to-earnings ratio of 36 times, compared to competitor Coherent (COHR.US) with a price-to-earnings ratio of 47 times. Another recent addition to the fund is Advanced Micro-Fabrication Equipment Inc. China (688012.SH), whose stock price has doubled since the beginning of the year. Despite the significant increase in the company's stock price, Liontrust fund managers believe that the market may still be underestimating the speed of localization of the Chinese chip manufacturing equipment supply chain. Other Chinese hardware companies held by the fund include chip equipment manufacturer Piotech Inc. (688072.SH) and laser radar sensor manufacturer Hesai (HSAI.US).