Hedge funds have been selling off U.S. tech (XLK) and media stocks (XLC) at the fastest pace in six months, according to Goldman Sachs. However, they have been finding opportunities elsewhere. In fact, Asia appears to be where the so-called “smart money” is moving, as hedge funds have been buying Asian stocks at the fastest pace in five months. More specifically, long buys outpaced shorts at a 1.5 to 1 ratio.
Interestingly, Asia is now the only region globally where hedge funds have a net long position. According to Goldman Sachs, net allocation to Asia’s emerging markets stands at 13.3%, among the highest levels in the past year. China, Taiwan, and Hong Kong have been the most popular markets, with hedge funds allocating a significant portion of their portfolios to these regions.
What Is Driving the Shift to Asia?
It seems like DeepSeek was the catalyst that caused the shift from U.S. tech to Asian markets. This was likely due to the Chinese AI startup’s R1 AI model that it released in January, which reportedly performed as well as Western rivals but at only a fraction of the cost.
This caused investors to begin worrying about whether or not American companies would begin scaling back on AI investments, which led to a decline in chip stocks like Nvidia (NVDA). On the other hand, Chinese stocks like Alibaba (BABA) have rallied since the release of DeepSeek’s model, with BABA stock hitting new 52-week highs.
Is BABA Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on BABA stock based on 11 Buys, two Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 74% rally in its share price over the past year, the average BABA price target of $151.75 per share implies 16.3% upside potential.
