Top China tech fund spurns AI stocks on risks

livemint.com:

A technology-focused China equity fund outperforming 98% of peers this year advises caution over the frenzy in artificial intelligence themes, saying it might be the biggest underpriced risk in the market.

“There are huge fundamental risks, especially in terms of public safety, in AI at this current stage," said Yun Bingwang, an investment officer at Qingdao Luxiu Investment Management Co. in an interview last week. “These uncertainties mean that we cannot make investment decisions."

Yun’s Luxiu Lvjing Fund has returned 76% this year, according to fund tracker Shenzhen PaiPaiWang Investment & Management Co., trouncing the benchmark CSI 300 Index by 88 percentage points. That puts the fund, which primarily invests in global tech companies, in the top 2% among 10,308 peer private-fund products.

The fund owes its outperformance to bets on online retailer PDD Holdings Inc., best known for hit shopping app Temu and domestic bargains trailblazer Pinduoduo, amid the stock’s slump earlier this year. The market misjudged Chinese consumers’ shift back into premium products after the end of Covid controls, said Yun. Dip buying in Apple Inc. shares in late 2022 also contributed to returns.

While Yun is keeping tabs on how AI is disrupting tech giants, he said there’s no rush to buy. He compares missing out on AI this year to side stepping the euphoria in Chinese private tutoring names in early 2021, with some firms losing almost all of their value later that year after a shock overhaul over the sector.

In China, six out the top ten performers on the benchmark gauge this year were lifted on AI wagers, with Dawning Information Industry Co.’s 73% advance helming the charge. The leading stock-focused mutual funds this year also count