For years, the heartbeat of Chinese tech investing lived inside the big consumer internet names.
The e-commerce giants, the food delivery platforms, the super apps that stitched daily life together.
If you owned Alibaba, Tencent or Meituan, you owned the growth story.
But lately, the pulse has shifted.
While the internet platforms have been fighting price wars and squeezing margins, a different corner of the market has been quietly pulling ahead: the companies that build the physical backbone of artificial intelligence.
Chips. Optical modules. Servers.
The less glamorous plumbing of the digital world – but increasingly where the earnings momentum lives.
Hardware takes the lead as platforms stall
The numbers tell the story.
Net income estimates for China’s broader information technology sector jumped about 50% year-on-year as of mid-January, according to Bloomberg Intelligence.
Meanwhile, the so-called “China Tech 8” – dominated by internet platforms like Alibaba, Tencent, Meituan, JD.com, Baidu, NetEase and PDD – actually saw earnings estimates fall roughly 12%.
Xiaomi stands out in that group as more hardware-focused, but most of the basket is still platform-heavy.
It’s the widest gap on record, and it’s been widening for two years.
Behind the divergence is a powerful mix of forces.
Globally, AI investment continues to surge as companies race to train larger models and modernise infrastructure.
Domestically, Beijing’s five-year economic blueprint puts technological self-reliance front and centre – effectively encouraging capital to flow into domestic chipmakers, optical suppliers and server manufacturers.
Names like Cambricon Technologies, Zhongji Innolight and Foxconn Industrial Internet are now expected to deliver strong annual profit growth well into 2027.
Over the past 12 months, several hardware leaders (including Zhongji Innolight, Cambricon, Hua Hong Semiconductor and Hygon Information Technology) have posted triple-digit share price gains as investors leaned into the AI cycle.
Meanwhile, some of the old tech heavyweights have been limping.
Within the Tech 8 basket, Meituan and JD.com were among the weaker performers, with their Hong Kong-listed shares sliding 35% and 26% respectively over the same period.
Why capital is rotating
Bloomberg Intelligence analyst Jason Liao points to competitive intensity as the main drag.
“As the majority of the Tech 8 are platform stocks that were dragged down by price wars in 2025, semiconductors – especially memory chip stocks – are seeing increased preference as beneficiaries of policy support and AI tailwinds,” he said.
In other words, investors are rotating toward where pricing power and growth visibility now sit, and away from businesses still locked in margin battles.
There’s also a structural element at play. The big internet platforms are already enormous businesses.
Even when they execute well, their sheer scale makes it harder to generate eye-catching growth rates.
Hardware suppliers, by contrast, are closer to the front edge of new demand cycles and benefit more directly when AI investment ramps up.
But the platforms aren’t finished yet
That doesn’t mean the internet giants are finished. Far from it.
The gap in earnings expectations is expected to narrow over time as competition stabilises and new growth avenues open.
Tencent, in particular, continues to show resilience in advertising and gaming, and is investing heavily in cloud and AI.
“Looking ahead we still see them as key drivers, not laggards, especially as they pivot toward new revenue streams such as cloud and AI,” Liao said.
Still, for now, the momentum clearly favours the builders rather than the platforms.
A new wave of AI energy in 2026
China has entered 2026 with fresh technological energy, barely a year after DeepSeek’s AI breakthrough rattled global markets and reignited domestic ambition.
New generative AI listings (including MiniMax Group and Knowledge Atlas Technology or Zhipu) have added fuel to the narrative, helping sustain investor enthusiasm.
Nomura analyst Bing Duan sees the hardware tailwind continuing as global AI spending accelerates.
The hardware companies have been benefiting from rising global AI investment, driven by strong demand for large language model training and technology upgrades from global AI players, Duan said.
While supply bottlenecks remain, particularly around advanced chips, those constraints may ease as global and local supply chains expand.
The long game favouring builders
Not everyone is ready to declare victory just yet.
Some analysts caution that the internet sector still lacks clear near-term catalysts for major valuation expansion unless earnings materially surprise on the upside.
Others point out that much of China’s AI investment has yet to meaningfully translate into revenue.
But for investors with a longer lens, the bigger signal may be how decisively capital is migrating toward the physical layers of the AI economy.
The market’s current message is clear,
The next leg of China’s tech earnings story is being built in factories, fabs and data centres, not just apps and marketplaces.
This article is not financial advice. Always do your own research or speak with a licensed adviser before making investment decisions.
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