30 January 2026

Jonathan Sparks

Chief Investment Officer, UK, HSBC Private Bank and Premier Wealth

The largest seven stocks in the US equity market, collectively known as the ‘Magnificent 7’ (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), have tripled in value over the last three years. This staggering growth is not without good reason: earnings for the tech titans have soared fairly simultaneously and all sit at the epicentre of the AI boom. Meanwhile, China’s top eight tech stocks have largely sat on the sidelines of the AI-driven rally, despite their focus on innovation, with their current valuation only half that of the US’s Magnificent 7 index.

Given this cavernous performance gap, it may seem Chinese tech companies are losing the AI race, yet this is far from true. Alibaba’s Qwen AI model reached 10 million downloads a week late last year, even before their most recent release that rivals the best US models for performance. Monetisation of these models, particularly those distributed as open source, is a lingering question, however this is an industry wide debate. Chinese companies have many of the same doors open to them, such as cloud services and software integration, as well as using their models for more efficient and targeted e-commerce, while not having the same exposure to cutting-edge chip manufacturing.

Rather than concluding US tech companies are too expensive, there is a strong argument Chinese tech stocks are good value. As shown by the latest earnings, the ‘Magnificent 7’ continue to defy expectations and clients are still queuing up for their services. However, more lofty valuations do mean they can be more volatile around earnings releases, as we have seen to the benefit of Meta but the detriment of Microsoft this week.

Chinese companies, which report a few weeks later, have a lower bar to beat. With recent focus more on efficiency than growth, investors would greet any shift in sentiment towards more top-line growth with open arms, at which point the gap in valuations would become all the more striking.

We are bullish on both US and Chinese tech stocks and focus on striking a balance between the two: cheaper Chinese stocks pair well with higher growth, albeit more expensive, US stocks.

Yet another blockbuster week for gold, and it’s more volatile cousin silver. Speculation around US intervention in the US dollar/Japanese yen market (swiftly denied by US Treasury Secretary Bessent) led to a sell-off in USD benefitting gold. And, as we have seen with gold of late, what goes up doesn’t necessarily come down. While this latest rally seems more speculative, gold’s place in the portfolio as an excellent diversifier and a safe haven means it remains popular with institutional investors and central banks. We, too, favour gold for exactly this reason.

Focusing on the UK, recent economic data has brought a note of optimism. Key Purchasing Manager’s Index (PMI) surveys showed modest growth above expectations. A stabilising of job vacancies, coupled with better sentiment on the manufacturing side than in much of continental Europe, is reflected in an improvement in business confidence. Given these surveys were taken after the UK Budget in November 2025, improvements can be attributed to putting related uncertainty behind us, and it’s still too early to define this as the start of stronger economic growth. At the very least, it highlights why UK equities markets warrant some selective exposure, particularly across the financials and materials sectors.