---
title: "Goldman Sachs' Liu Jinjin: No Systemic Bubble in China's AI Sector; Significant Room for Foreign Capital Allocation"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/295325347.md"
description: "Liu Jinjin, Chief China Equity Strategist at Goldman Sachs, stated that there is no systemic bubble in China's AI sector, as its total market capitalization has not yet fully reflected its potential contribution to the economy. He highlighted the attractiveness of A-shares in global asset allocation, believing that the Federal Reserve is likely to maintain policy stability over the next six months, which is favorable for global risk assets. The core anchor for the market in the second half of 2026 will be corporate earnings growth, with a recommendation to focus on the power industry chain, hardware infrastructure, and physical AI sectors"
datetime: "2026-08-09T12:16:49.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/295325347.md)
  - [en](https://longbridge.com/en/news/295325347.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/295325347.md)
---

# Goldman Sachs' Liu Jinjin: No Systemic Bubble in China's AI Sector; Significant Room for Foreign Capital Allocation

**“We believe that AI, particularly within the scope of Chinese equities, is not a bubble.”** Recently, Liu Jinjin, Chief China Equity Strategist at Goldman Sachs, made these remarks while participating in The Paper’s special feature “New Momentum, New Narrative—‘Chief Connect’ 2026 Market Outlook.” He noted that **the total market capitalization of all AI-related stocks in China has not yet fully reflected the benefits AI may bring to the overall economy.**

Therefore, **Liu Jinjin believes that, given the relationship between total market capitalization and potential economic contribution, there is no obvious systemic bubble in China's AI sector.**

From a global perspective, Liu Jinjin pointed out that Goldman Sachs Research expects the Federal Reserve to likely hold steady over the next six months. The overall environment remains relatively favorable for global risk assets. The trend of the RMB exchange rate can provide certain support for A-share liquidity. Furthermore, due to the low correlation with US and global stock markets, the attractiveness of A-shares in global asset allocation is prominent.

In addition, Liu Jinjin emphasized that the core anchor for the market in the second half of 2026 will be corporate earnings growth, where the ability to deliver performance will directly determine excess returns for individual stocks and industries.

Regarding specific allocations within the AI sector, Liu Jinjin believes that three sub-sectors deserve special attention: the power industry chain, hardware infrastructure, and physical AI.

## **China Offers Attractiveness in Global Allocation**

Recently, market expectations regarding the Federal Reserve's monetary policy have undergone significant changes. Liu Jinjin stated that at the beginning of the year, the market once believed there might be two to three rate cut opportunities within the year. However, interest rate expectations reflected in the US Treasury market subsequently reversed significantly, with current market expectations suggesting the possibility of a Fed rate hike.

However, according to Goldman Sachs Research, **the Federal Reserve is likely to maintain policy stability over the next six months. A more likely timing for rate cuts may be next year.** Liu Jinjin stated that by then, US GDP growth may slow down, inflationary pressures are expected to gradually decline, and the labor market may continue to cool, providing sufficient conditions for the Fed to cut rates. Goldman Sachs' US economics team currently expects the Fed to cut rates by 25 basis points in June and December of next year, respectively.

Against this macroeconomic backdrop, global risk assets, especially equities, are still expected to benefit from a relatively favorable external environment. Liu Jinjin pointed out that although the US dollar trend has exerted some pressure on certain Asian currencies, the RMB has shown a gradual appreciation trend against the US dollar over the past few months to half a year, providing important positive support for A-share liquidity.

**“I just spent over a month on roadshows in Europe and the US, meeting many overseas investors. This time, I could feel that their interest in Chinese stocks or Chinese assets remains quite high,”** Liu Jinjin said.

Data from Goldman Sachs shows that the relative allocation of public funds (especially those focused on emerging markets) to Chinese stocks has climbed to multi-year highs, and the total exposure of hedge funds is also approaching cyclical peaks. However, the net position (long minus short) remains relatively low. This indicates that while overseas capital is actively seeking investment opportunities in the Chinese market, it currently places significant emphasis on risk hedging and has not yet universally adopted large-scale directional investments.

Active investors, on the other hand, demonstrate a stronger willingness for medium- to long-term allocation. The asset size of global active public funds tracked by Goldman Sachs is approximately $1.4 trillion. Data shows that some investors focused on emerging markets have already formed a slight overweight position in Chinese stocks. This marks the first time in the past 15 years that overseas active investors have overweighted Chinese stocks within the emerging markets universe.

Meanwhile, the IPO markets for A-shares and Hong Kong stocks have been quite active this year, with the proportion of overseas investors participating in Hong Kong IPOs returning to highs not seen since 2021.

Liu Jinjin stated that the Hong Kong IPO market has been relatively active this year, with over 100 new listings and financing exceeding $30 billion since the beginning of the year. Both the number of issuances and the financing scale are at highs not seen in the past one to two years. However, concerns about the liquidity “siphon effect” caused by large IPOs may be excessive.

From the perspective of capital supply and demand, an increasing number of listed companies are raising their dividend payout ratios and actively repurchasing shares. Goldman Sachs estimates that the total amount of dividends and buybacks by A-share and Hong Kong-listed companies this year may exceed 4 trillion yuan, which is sufficient to cover the capital demand brought by IPOs. Therefore, Liu Jinjin believes that the large-scale IPO supply will not cause particularly tight market liquidity. The performance of new listings since the beginning of the year also shows that market liquidity is very ample.

Notably, Goldman Sachs' calculations show that the total market capitalization of China's AI-related enterprises accounts for about 11% of the global AI sector, but overseas capital allocation accounts for only about 1% of their total AI positions. This huge gap implies ample room for continued inflows of foreign capital into China's AI sector.

## **Investment Logic Shifts from Sentiment to Performance**

After experiencing significant market volatility, the difficulty of investing solely based on industry sentiment or thematic popularity is rising. Liu Jinjin emphasized that **the core anchor for the market in the second half of 2026 will be corporate earnings growth, where the ability to deliver performance will directly determine excess returns for individual stocks and industries.**

Liu Jinjin stated that the MSCI China Index's earnings declined by 8% year-on-year in the first quarter, primarily dragged down by heavy subsidy investments by internet platforms. However, performance is expected to see significant recovery in the second and third quarters. Therefore, the forecast for full-year earnings growth of MSCI China stocks remains at around 10%, while expectations for A-share earnings are more optimistic, with the full-year A-share earnings growth forecast maintained at 20%. The all-inclusive earnings growth rate for A-shares in the first quarter was only 5%, expected to rebound to 10% in the interim report period, and further accelerate in the second half of the year.

Regarding the inflection point for earnings of Hong Kong-listed internet companies, Liu Jinjin believes it is highly likely to occur in the next one to two quarters. With the superposition of three favorable factors, the earnings recovery of the internet sector has strong certainty.

**“Over the past year or so, internet platforms have incurred subsidy losses exceeding 30 billion yuan. The subsequent cooling of industry subsidy competition will directly drive sequential earnings improvement; secondly, the commercialization of domestic large models and AI agents is accelerating, with AI tokens and cloud services creating new revenue increments; finally, the fundamentals of traditional core businesses such as e-commerce and gaming remain stable,”** Liu Jinjin said.

When discussing sectors significantly catalyzed by earnings, Liu Jinjin identified three main areas. First, **the raw materials sector, where optimized global supply and demand dynamics combined with continuous capital expenditure in the AI industry chain provide ample earnings elasticity, leading institutions to maintain high allocations. Second, the full-industry-chain AI hardware sector, where the industry's prosperity cycle has not been interrupted by short-term corrections, offering strong certainty in earnings growth. Third, the energy sector, where geopolitical conflicts support the central price of oil, and domestic energy companies are currently valued at low levels, highlighting outstanding earnings stability over the next six months to a year.**

**“Signals of rotation are appearing in Chinese stocks, and we still tend to overweight A-shares. Meanwhile, given that the valuations of some large-cap H-share internet stocks have been significantly adjusted year-to-date, and profits are expected to gradually recover in the coming quarters, configuration opportunities in soft technology are also worth noting alongside hard technology,”** Liu Jinjin said.

## **No Systemic Bubble in the AI Sector**

In the first half of this year, AI hardware became one of the most crowded trades globally. After a deep correction in the sector, the market has been debating whether a bubble exists in AI.

**“We believe that AI, particularly within the scope of Chinese equities, is not a bubble,”** Liu Jinjin stated. Observing from a top-down perspective, the total market capitalization of all AI-related stocks in China has not yet fully reflected the benefits AI may bring to the overall economy. Therefore, from the relationship between total market capitalization and potential economic contribution, there is no obvious systemic bubble in China's AI sector.

**However, it is undeniable that local overheating may occur in the AI sector.** Liu Jinjin pointed out, **“At the peak in June, valuations of some A-share AI hardware targets, as well as the ChiNext and STAR Market, touched five-year highs, indicating high market risk appetite at the time, with valuations in some sub-sectors possibly being somewhat overheated.”**

As the market corrected, investors' expectations for earnings growth in AI hardware are being reassessed. In Liu Jinjin's view, **the recent adjustment has released some valuation pressure. “Following the correction over the past month or so, we believe valuations have returned to a relatively reasonable and healthy level.”** He stated that current stock prices reflect expectations for future earnings growth more reasonably than before, making this adjustment closer to a healthy correction.

Regarding specific allocations within the AI sector, Liu Jinjin divided the AI industry chain into a five-layer structure: upstream power, semiconductors, hardware infrastructure, large models, and downstream applications. Among these, three sub-sectors deserve special attention.

In his view, the power industry chain represents a long-term structural opportunity. The global market share of domestic power equipment manufacturers is continuously rising, current sector valuations are at low levels, and large-scale computing power construction will continue to drive industry demand. Hardware infrastructure such as PCBs, optical modules, and data centers has extremely strong earnings certainty, with a stable performance delivery rhythm over the next two to three years. The physical AI sector, relying on China's comprehensive manufacturing system, possesses globally leading competitiveness, with broad overseas expansion space for companies in industrial intelligence and humanoid robotics.

In addition, the software application end also has growth potential. Liu Jinjin introduced that the token cost of domestic large models is far lower than overseas competitors, and the commercialization of AI agents and industry clouds is continuously landing. **“AI tokens are expected to become a new highlight of China's exports after physical goods, and the logic of AI commercial monetization will continue to be realized.”**

Risk Warning and Disclaimer

The market involves risks, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment decisions made based on this content are the sole responsibility of the investor.

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