By Jack Denton
This was a great year for Chinese stocks, and especially technology names such as Alibaba. Investors can expect the bull run to continue, according to Goldman Sachs, albeit with some caveats.
Alibaba's American depositary receipts -- or ADRs, the company's closest thing to U.S.-listed stock -- have gained more than 75% this year, blowing the S&P 500 out of the water. Other Chinese tech names, such as NetEase and Baidu, have also performed well, with those stocks up more than 50% each.
China's tech sector has had a remarkable turnaround after years of regulatory pressures and economic headwinds. Alibaba ADRs remain priced around $150 -- up 0.5% in Monday's premarket -- which is just half of the late-2020 high, but a price level that may have been inconceivable in 2022, for instance, when it traded near $60.
Helping Alibaba and others rally has been the narrative around artificial intelligence (AI), with trends that made Nvidia the first $5 trillion company also helping Chinese players in this booming tech space.
"AI has changed the game for Chinese tech equities," a team led by Kinger Lau at Goldman Sachs wrote in a note on Monday. They detailed lessons learned from China in 2025 and some predictions for 2026 -- including more gains ahead, though with a change in tone.
"Two consecutive years of positive returns: a slow(er) bull market is probably in," they wrote. "We expect the bull run to continue, but at a slower pace. We forecast Chinese stocks to rise 38% by end-27... This is reminiscent of an equity cycle transition from Hope to Growth."
Other lessons learned from China in the last year, according to Goldman Sachs, are that better trade outcomes -- including less of an impact from U.S. tariffs than expected -- have offset domestic fiscal policy misses. Despite headwinds from trade, they added, "China's journey to the world" continues.
Consumers are still spending, Lau and the team at Goldman also noted, though in different pockets of China's economy -- and inflation remains a key trend ahead, with new hopes for policy to ignite healthy price growth.
Lau and co also added that the latest five-year plan from the Chinese government "may have redefined investors'...plan for Chinese equities," after technology was set among top priorities for the years to 2030.
Despite lingering risks, "China is investible," the team at Goldman wrote, and "diversification value is on full display." On tech and AI -- which has a bearing on Alibaba as one of China's key players in the space -- Lau's team is also positive.
"The breakthroughs in AI have rewritten the narrative for tech equities, " they wrote. "Valuations have re-rated in the Chinese AI tech ecosystem, but they look inexpensive vis-à-vis the U.S., considering China's potential upside in capex spend and its focus on AI monetization via use-case creation."
The technology arms race between the U.S. and China, they added, "will likely create structural winners" in China -- particularly in certain niches. Those are where China's cost advantages are high, such as in power and human capital, and where government support is strong, such as in semiconductor design and manufacturing.
After years of stagnation for Chinese stocks such as Alibaba, it gives investors something to look forward to in 2026.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 22, 2025 08:41 ET (13:41 GMT)
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