Asian hedge funds, including Hong Kong-based Monolith Management, are increasing their bets on Chinese tech giants including Xiaomi and Baidu, drawn by AI advancements despite the looming threat of stricter US export controls on advanced chips, according to a Reuters report.

Chinese tech stocks in general have lagged behind their US counterparts during this year’s AI-driven tech-sector boom prompting caution among many global investors. Hedge fund managers though are more bullish, encouraged by attractive valuations and the growing adoption of AI by China's 1.4 billion people.

Monolith, which oversees $300m in assets, has focused on Xiaomi for its innovative HyperOS platform and expanding AI-driven ecosystem, including IoT devices and vehicles.

The report quotes Timothy Wang Monolioth's Chief Investment Officer as saying: “Xiaomi’s AI-driven ecosystem offers a larger scope compared to many Western peers.”

Similarly, GenInnov Funds is increasing its exposure to Chinese tech, especially Baidu, which has rolled out AI tools like a text-to-image generator for advertisers and plans to launch AI glasses and expand its robotaxi services beyond mainland China.

“We’re optimistic about the commercialisation of large language models and China’s supply chain strengths,” said Wang. “For hedge funds, the coming year could unlock significant value in Chinese tech.”