Chinese AI stocks seen leading market gains in 2026 as banks expect momentum to moderate
Chinese artificial intelligence related stocks are expected to remain a key driver of equity market gains in 2026, though the pace of growth is likely to slow compared with the sharp rallies seen over the past year, according to major international banks.
Analysts say enthusiasm around China’s AI sector has been fuelled by strong policy support, rapid commercial adoption and rising confidence in domestic technology capabilities. These factors have helped lift valuations across a broad range of companies involved in chips, data centres, cloud services and AI applications.
Private bank Julius Baer has forecast that Chinese equities will continue to benefit from this trend, setting a 12 month target of 5,100 for the CSI 300 Index. That level implies a gain of about 7.6 per cent from the index’s recent close, suggesting further upside even as the market enters a more mature phase of the rally.
Bank strategists note that AI has become one of the most visible investment themes in China, supported by government efforts to build self reliance in advanced technologies. From large language models to industrial automation and smart manufacturing, AI is increasingly embedded across the economy rather than confined to a narrow group of tech firms.
However, analysts also caution that the explosive gains seen in parts of the sector may not be repeated at the same pace. As expectations rise, earnings delivery and sustainable business models will matter more than broad thematic enthusiasm. Valuations in some AI related stocks have already moved well above historical averages, increasing the risk of short term corrections.
Banks expect the focus in 2026 to shift toward companies with clearer revenue visibility and stronger balance sheets. Hardware suppliers, software developers and service providers that can demonstrate commercial success beyond pilot projects are likely to outperform more speculative names.
The broader market backdrop also plays a role. While policy support remains in place, China’s economic recovery has been uneven, with domestic consumption and property investment still under pressure. This environment could limit overall market upside, even if selected sectors continue to attract capital.
Analysts say AI stocks may act as a partial buffer against macroeconomic uncertainty. As one of the few areas showing consistent growth potential, the sector is likely to remain attractive to both domestic and overseas investors seeking exposure to China’s long term technology strategy.
At the same time, banks warn that concentration risk is rising. Heavy inflows into popular AI names have made market performance more dependent on a relatively small group of stocks. Any disappointment in earnings, regulation or technological progress could have an outsized impact on sentiment.
Looking ahead, most forecasts suggest a more selective market in 2026 rather than a broad based surge. Gains are expected to be steadier, driven by fundamentals rather than rapid multiple expansion. Investors may need to be more disciplined, focusing on companies that can translate AI innovation into sustained profitability.
Despite the expected cooling in momentum, banks remain broadly constructive on Chinese equities. They argue that policy stability, improving corporate governance and the strategic importance of AI provide a supportive foundation. For many investors, the question is no longer whether AI will shape China’s market performance, but how to position for its next phase of growth.
