Why do China fund managers maintain AI and chip exposure post-July decline?
China-based fund managers demonstrated sustained conviction in artificial intelligence and semiconductor themes in August 2026, even as broader market concerns led to a significant July sell-off in global technology shares and increased hedging across Asia.
Sustained Conviction Amidst Market Volatility
Despite a notable decline in global semiconductor equities during July 2026, China's fund managers continued to prioritise artificial intelligence (AI) and chip-related investments in August.
Findings from BofA Global Research's August 2026 Asia Fund Manager Survey, which polled 98 participants managing US$272 billion in assets from August 7–13, revealed that 73 per cent of surveyed China-based managers identified AI and chips as one of their top two investment themes.
This figure marks an increase from 60 per cent in July 2026 and 50 per cent in June 2026, demonstrating a consistent and growing preference for these sectors within China's investment community, even as other markets reacted to short-term pressures.
Global Semiconductor Downturn in July
The sustained interest in AI and chips among China's fund managers contrasts with the broader market performance observed in July 2026. Global semiconductor shares experienced a downturn during that month, driven by investor concerns regarding the potential for disappointment in AI monetisation.
For instance, the Philadelphia Semiconductor Index, a key benchmark for the sector in the United States, registered an approximate 21 per cent decrease in July 2026, representing its most substantial monthly fall since October 2008.
Similarly, in the Hong Kong market, GigaDevice Semiconductor's stock price declined from HK$1,188 (US$151) to HK$459 over the same July 2026 period, reflecting a widespread re-evaluation of valuations in the technology segment.
Dual Strategy: Growth and Defensive Positioning
The survey also revealed a concurrent shift towards more defensive investment strategies among China's fund managers. Stocks featuring share buy-backs or dividend payments emerged as the second most favoured theme in August 2026, selected by 27 per cent of respondents. This represents a significant increase from 16 per cent in July 2026.
This dual approach suggests that while there is enduring conviction in the long-term prospects of AI and semiconductors, fund managers are simultaneously implementing measures to mitigate downside risks.
This strategy appears to align with a broader regional trend; across Asia, 59 per cent of surveyed fund managers reported hedging against a potential decline in AI-related stocks in August 2026, more than double the level recorded a month prior.
Implications for Asia's Capital Allocation
The findings from BofA Global Research's August 2026 survey point to a nuanced capital allocation strategy among China's fund managers. Their increasing preference for AI and chips, despite a significant sector-wide correction, suggests a belief in the fundamental long-term value of these technologies.
However, the simultaneous rise in demand for defensive stocks indicates a heightened awareness of market volatility and a desire for financial resilience. For decision-makers in Asian markets, this reveals that capital will likely continue flowing into specific AI and chip-related assets within China, alongside a preference for companies demonstrating strong shareholder returns.
Investors should observe Q3 2026 earnings reports for semiconductor firms, due in late October, to assess actual monetisation trends and determine if July's market concerns were ultimately justified.
This analysis is journalism, not investment advice; consult a licensed professional before making financial decisions.
Pieces are credited to the desk that commissioned and edited them. Our editorial standards, and the desks behind them, are set out on the Editorial Standards and Team pages.
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