As Wall Street grapples with volatility and recession fears, China's stock market is on a tear. While the S&P 500 index is down over 4.6% year-to-date, three China-based stocks have surged more than 50%, fueled by AI investments and shifting investor sentiment.

China's AI Boom Powers A Market Comeback

Citi recently revised its stance on U.S. stocks to Neutral from Overweight, citing economic slowdown concerns, reported Business World. Meanwhile, the firm upgraded China's rating to Overweight, adjusting its GDP growth forecast to 4.7% from 4.5%, thanks to heightened AI-driven investments.

Goldman Sachs echoed this sentiment, as reported by Markets Insider, noting that China’s technology industry remains undervalued compared to global peers.

The MSCI China Index gained 20% YTD, its best start to a year ever. Analysts at Goldman Sachs highlighted that global mutual funds, which had largely stayed away from Chinese equities, are now reconsidering their stance. If institutional investors increase their allocation by just 1%, it could drive an estimated $8 billion in net buying.

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These 3 Stocks Are Leading China's Market Rally

Interestingly, three of 10 stocks (of market cap $2 billion and above) that have delivered the highest returns YTD, are from China:

No.	Ticker	Company	Perf YTD (as of 2 p.m. ET, March 11)	Country
1	VNET	VNET Group Inc	132.41%	China
2	XPEV	Xpeng Inc	128.74%	China
3	TUYA	Tuya Inc	126.44%	China
4	HEES	H&E Equipment Services, Inc.	94.17%	USA
5	ROOT	Root Inc	91.13%	USA
6	KC	Kingsoft Cloud Holdings Ltd	67.73%	China
7	HSAI	Hesai Group	44.73%	China
8	BABA	Alibaba Group Holding Ltd	62.70%	China
9	GDS	GDS Holdings Ltd	64.24%	China
10	ITCI	Intra-Cellular Therapies Inc	55.82%	USA

Among the biggest winners in China's stock market rebound are:

1. VNET Group Inc. VNET: Up 132.41% YTD, this data center services provider has capitalized on China's growing cloud and AI infrastructure needs.
2. XPeng Inc. XPEV: The EV maker soared 128.74% YTD, riding the wave of China’s push for AI-driven autonomous driving.
3. Tuya Inc. TUYA – A major player in AIoT (Artificial Intelligence of Things), Tuya has climbed 126.44% YTD, benefiting from AI-driven automation trends.

Wall Street's Volatility Shifts Attention Eastward

While US stocks struggle, Chinese equities are benefiting from a shift in sentiment. The S&P 500 has fallen below its 200-day moving average, and its market leaders are lagging, raising concerns about near-term performance.

Citi's macro strategist Dirk Willer noted that while U.S. stocks might regain momentum when the AI surge resumes, short-term growth prospects appear weaker relative to global markets.

The Hang Seng Tech Index has surged 32% YTD, with major players like Alibaba Group Holdings Ltd BABAF BABA, Tencent Holdings TCEHY and Baidu Inc BIDU all posting double-digit gains.

Analysts believe China’s latest AI-driven tech breakthroughs could have staying power, making it a compelling play amid U.S. market jitters.

With Citi and Goldman Sachs pointing to China’s AI-driven resurgence, investors are taking a fresh look at Chinese stocks. While Wall Street navigates uncertainty, China's top-performing equities are proving hard to ignore.

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