Trump-Xi summit revives China tech rally hopes as U.S. reportedly clears Nvidia H200 sales

Chinese equities could get a fresh boost after this week's high-stakes meeting between U.S. President Donald Trump and Chinese President Xi Jinping, with investors saying the summit could ease trade tensions and revive momentum, especially in the country's lagging technology shares.

Goldman Sachs analysts said discussions were expected to focus narrowly on trade and export controls, including tariffs, semiconductor restrictions and rare earth exports. The bank said it expected China to agree to buy more U.S. agriculture products, energy and aircraft in exchange for avoiding further tariff escalation.

While Goldman does not expect a sweeping "grand bargain," it said the meeting could still "act as a tactical catalyst for strength in the Chinese yuan and in Chinese equities."

Dong Chen, chief investment officer at Bank J Safra Sarasin, viewed the summit as a near-term catalyst for Chinese equities, especially after months of underperformance compared with U.S. technology peers riding the artificial intelligence boom.

While markets did not appear to have "extremely high expectations" for the meeting, Chen said investors have been fairly upbeat. The fact that Trump and Xi were already meeting sent a "positive signal," he added.

The prospect of even a limited thaw in relations is particularly important for Chinese technology firms, which remain constrained by U.S. chip export restrictions. It also comes as global investors continue piling into AI-related trades, particularly in South Korea and Taiwan.

Having access to Nvidia's latest chips… is very, very critical for the Chinese players to compete on a global stage.Jiong ShaoBarclays

Jiong Shao, China internet analyst at Barclays, highlighted that "the most important competitive arena today, especially between U.S. and China, is in AI, and the greatest bottleneck today in AI is compute."

"The secret weapon, or not so secret weapon for the U.S. AI players, is access to the Nvidia chips, which Chinese companies don't have," he said.

That has made Nvidia CEO Jensen Huang's presence in Beijing alongside Trump especially noteworthy for investors watching the AI race, he explained.

"Having access to Nvidia's latest chips… is very, very critical for the Chinese players to compete on a global stage," Shao said.

Shortly after Trump met Xi, Reuters reported that Washington had cleared sales of Nvidia's H200 AI chips to several major Chinese technology firms, citing three people familiar with the matter. The roughly 10 Chinese firms include Alibaba, Tencent, ByteDance and JD.com in a potential breakthrough for China's AI sector.

Investors are also increasingly warming to China's AI ecosystem after recent earnings from companies such as Alibaba and Tencent suggested cloud and AI-related demand was accelerating.

Shao said investors had initially questioned whether massive AI spending by global technology companies would generate returns. Sentiment shifted after major U.S. hyperscalers posted stronger growth.

"Now, investors start to see the returns from their capex," he said, adding that China's internet giants may simply be "a few quarters behind the U.S. in terms of the capex investment."

## Investors stay cautious

Some of the rally has started to show up in markets. The Hang Seng Tech Index inched around 0.5% higher Thursday, while the broader Hang Seng Index climbed roughly 0.3%.

Year-to-date, the Hang Seng Index is up by more than 3% while the Hang Seng Tech Index is down over 7%. The mainland CSI 300 is up nearly 7% in the same period.

Still, these relatively modest moves pale in comparison to the sharp rallies seen in some other markets across the region, including Japan, South Korea and Taiwan.

China's ChiNext index, often described as the country's answer to the Nasdaq, fell about 2% on Thursday. However, the index, which tracks mainland-listed companies — also known as A shares — with high exposure to the semiconductor, healthcare and new energy sectors, remains near record highs.

"We believe that some traders are in a wait-and-see mode, taking profit and hedging their positions in the event that the U.S.-China summit fails to meet expectations," said Jeff Mei, COO of BTSE Group.

"However, it is highly probable that we could see a reversal and rally post-summit as Trump is likely to give concessions in exchange for assistance in other areas."

Still, not everyone is convinced China's equity rally will broaden meaningfully without a broader, stronger earnings growth.

"The problem with the Chinese equity market, if you look at MSCI China, for example, the problem is still earnings, right?" Chen said. "Earnings per share actually still didn't show any meaningful improvements."

Chen also pointed to a growing divergence between mainland-listed Chinese technology and Hong Kong-listed internet firms.

"A lot of those AI beneficiaries, especially on the hardware front, are listed in A shares, and you actually see very stellar performance in China," he said. By contrast, many constituents of Hong Kong's Hang Seng Tech Index are internet and e-commerce companies that are not direct AI beneficiaries.

That view echoes Goldman Sachs' preference for mainland A-shares over Hong Kong stocks.

For now, investors appear focused less on the prospect of a sweeping geopolitical reset and more on the possibility that both sides can stabilize relations.

"At least there should be some extension of this trade truce," Chen said.