A prominent Asian money manager is making a bold move: increasing exposure to China’s artificial‑intelligence (AI) stocks while reducing holdings in South Korea and Taiwan. The decision highlights a growing conviction among investors that China’s AI landscape could deliver long-term gains and withstand future market corrections.

Why the Pivot to China’s AI Over Korea and Taiwan

Kelly Chung, who helps oversee the Value Partners Asian Income Fund and the Asian Innovation Opportunities Fund, has led this reallocation. She argues that some Chinese AI companies remain relatively cheap in terms of valuation, especially given China’s potential to scale up AI infrastructure. The capital expenditure on AI in China is still relatively low, offering significant runway for growth compared to more mature markets.

As a result, since August, Chung has been trimming stakes in South Korean and Taiwanese tech names and redirecting that capital into Chinese hyperscalers listed in Hong Kong. The two funds she manages together hold roughly US$490 million and have each outperformed the majority of their peers over the past year, illustrating strong performance amid selective reallocation.

Valuation, Risk, and Long-Term AI Outlook

Part of the rationale behind this rotation is valuation sensitivity. While earnings growth in Korea and Taiwan has been upgraded in some cases, Chung suggests that the recent rallies in these markets may be driven more by re-rating than fundamentals, making them more vulnerable to profit-taking. In contrast, China’s AI infrastructure is still in an early stage, providing potential for compounding gains as domestic demand and government support continue.

Some analysts view the relatively low current capital expenditure as a feature rather than a drawback. If China accelerates spending on AI infrastructure — including data centers, compute power, and chips — it could unlock asymmetric growth. Nevertheless, this strategy carries risks such as regulatory uncertainty, geopolitical tensions, and execution challenges that may influence the trajectory of returns.

Implications for Asia Equity Strategy

Chung’s rotation may signal a broader shift in how Asian fund managers are positioning themselves within the AI theme. Rather than chasing high multiples in Korean chipmakers or Taiwanese semiconductors, some are reallocating toward Chinese cloud players and AI-native companies. This trend could reshape capital flows across the region and suggests that investors are increasingly discriminating, favoring structural AI stories over cyclical or hardware-dependent plays.

However, the move raises strategic questions about diversification. By concentrating more on Chinese AI, funds may be exposed to idiosyncratic risks tied to policy or regulation. At the same time, reducing exposure to Korea and Taiwan could mean missing near-term earnings upgrades in those markets. For institutional investors, this trade-off is both compelling and challenging.

Looking ahead, investors should monitor several key indicators. Capital expenditure trends in Chinese cloud and AI companies will reveal whether growth expectations are met. Regulatory signals from Beijing could shape the AI infrastructure landscape. Valuations in Korea and Taiwan will indicate if rotation back to those markets is warranted. Finally, fund flows across Asia could show whether capital is broadly shifting toward China’s AI potential or if this remains specific to select managers.