The Trump administration ordered Anthropic to suspend foreign access to its most powerful AI models, Fable 5 and Mythos 5, citing national security concerns. That very day, Chinese AI developer Zhipu released its newest model as open-source software with no usage restrictions at all. Investors drew the contrast quickly.

The open-source strategy

As US developers face mounting restrictions on frontier model access, Chinese developers are leaning into wide distribution to attract cost-sensitive enterprise users.

Bank of America analysts said China is positioned to capture a meaningful share of the global AI market in the "value-for-money" segment. Chinese models are gaining traction as affordable alternatives to pricier US frontier tools, the bank said.

"For investors already heavily exposed to US-centric AI leaders, Chinese shares offer differentiated exposure," said Alvin So, Goldman Sachs equity strategist for Asia.

"Zhipu is being rewarded because investors see a very clear contrast in AI strategy," said Charu Chanana of Saxo Markets.

The valuation gap

The Anthropic order accelerated a longer-running story: Chinese AI companies trade at significant discounts to their US counterparts.

Alibaba GroupBABA

carries a forward price-to-earnings ratio of 17. Robotaxi leader BaiduBIDU

trades at just 14 times expected earnings. Tencent, owner of the WeChat app with over a billion users in China, trades at 13 times forward earnings.

AmazonAMZN

, which runs a comparable mix of e-commerce and cloud businesses, trades at 27 times forward earnings, according to The Wall Street Journal.

Goldman Sachs research shows global investors remain underexposed to the space. China accounts for 10% of global AI-related market capitalization, yet global mutual-fund managers allocate just 1.2% of their global tech portfolios to Chinese AI equities.

Michael Burry, the investor known for calling the 2008 housing collapse, recently disclosed he added to his Alibaba stake, noting, "It is the most advanced company in China as far as AI strategy goes."

The risks that remain

Not every Chinese AI stock is cheap. Zhipu's shares have surged more than tenfold since its January IPO. Cambricon Technologies, an AI chip designer, trades at 128 times forward earnings, compared with 23 times for NvidiaNVDA

.

The Pentagon recently added ~two dozen Chinese companies to its list of businesses it says work with China's military, including Alibaba. That designation could limit their US operations.

Access is a practical barrier too. Some Chinese companies appear on US blacklists and are entirely unavailable to American investors. Others trade in Hong Kong or through American depositary receipts on US exchanges, but purchasing them is less straightforward than buying domestic stocks.

Goldman noted that China's AI market gained traction early in 2025, when DeepSeek released a large language model proving local firms could compete globally. "They're in a different cycle," he said. That cycle is now intersecting with US policy decisions that could widen the divergence further.