Chart Advisor: China’s AI and Semiconductor Progress

From SIA Charts

1/ China’s Technological Advancements: AI and Semiconductor Progress

2/ China Technology ETF (CQQQ) vs. Magnificent Seven ETF (MAGS)

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China’s Technological Advancements: AI and Semiconductor Progress

China is making significant strides in both the AI and semiconductor sectors, signaling growing independence and increased competition on the global stage. In the AI space, DeepSeek, a Chinese startup, is offering advanced AI models that rival those of leading U.S. companies, such as OpenAI’s ChatGPT. With a focus on cost-effectiveness, DeepSeek has positioned itself as a key player in the AI market, helping China gain ground in AI development and potentially reshaping global AI dynamics. On the semiconductor front, Hygon Information Technology, a Chinese chipmaker, has introduced its new processor with advanced memory technologies, aimed at competing with Nvidia. This highlights China’s progress in semiconductor manufacturing and marks an important step toward reducing the country’s reliance on foreign semiconductor technology. The growing capabilities in both the AI and chip sectors point to increased self-sufficiency. Together, these developments demonstrate China’s ongoing efforts to expand its technological influence, reduce reliance on Western technology, and build its own competitive capabilities. This has generated significant attention in the U.S. technology and investment communities, where U.S. exceptionalism has been running high. However, instead of allowing emotions to cloud our investment thesis, let’s examine the SIA platform and take a hard look at the performance of the Magnificent Seven stocks. We’ll see what the relative performance matrices tell us about potential money flows for this developing theme in 2025.

Courtesy of SIA Charts

The first chart presented is a good proxy for the Chinese technology sector from Invesco, called the Invesco China Technology ETF (CQQQ). This is essentially a Chinese version of the now-popular QQQ ETF, which tracks the U.S. NASDAQ high-tech industry. Initially, this ETF showed a negative trend, but it has improved significantly in 2024 and the early part of 2025. While the unit price of the ETF trended lower from 2021 to 2024, it has now risen above the negative trend line, rallying to resistance at $51.33 before pulling back to support levels around $36.66. The ETF has now moved into a column of X’s and recently formed a point-and-figure triple-top formation. This puts all eyes back on resistance at $51.33, a level that, if surpassed, could signal another bullish move, forming a spread quadruple-top formation. Of course, these signals are secondary to our main focus: relative strength. The China Technology ETF is back in the favored zone within the SIA International Equity Universe ETF Report, where it ranks #19 in the green position. Additionally, it boasts a perfect SIA SMAX score of 10/10, reflecting near-term strength against other asset classes. Should resistance at $51.33 be penetrated, the next visible resistance on the point-and-figure chart could be at $62.57.

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China Technology ETF (CQQQ) vs. Magnificent Seven ETF (MAGS)

Courtesy of SIA Charts

The next comparison for the China Technology ETF (CQQQ) is against the Magnificent Seven ETF (MAGS), which includes the eight components: Meta Platforms (META), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOG), Apple Inc. (AAPL), Tesla Inc. (TSLA), Nvidia Corp. (NVDA), Microsoft Corp. (MSFT), and the standard version of the NASDAQ technology index (QQQ). We have run an SIA matrix scaled at 6% for an investment-grade technical analysis of these positions against one another. Several things stand out here, with the most notable being Nvidia (NVDA), which has the lowest SIA rank score of 38.69%, a negative SMAX score of 5, and a negative quarterly performance of -11.57%. This is in stark contrast to the previous year, where NVDA shares produced a positive return of 81.51%. Another important point is that five of the seven components in this analysis are plotted below the MAGS ETF in the attached table. They also exhibit negative SIA SMAX scores and underperforming rates of return over the last month, especially when compared to the Invesco China Technology ETF (CQQQ), which has performed at +23.73% over the same period.When we look at CQQQ individually, it shows a YTD performance of 15.44%, with only Meta Platforms (META) outperforming it at 23.87%. It’s important to note that the seven stocks in the Magnificent Seven have a combined market capitalization topping $18 trillion, according to recent Dow Jones Market Data. Therefore, any pullback in these stocks could have two potential effects: a quick market correction where the money simply deteriorates, or a scenario where the stocks move sideways, and money outflows benefit the broader markets, allowing for a more balanced market breadth. Of course, there is always the possibility that these stocks continue to rally from current levels, but that would likely require marked improvements in SIA relative strength and a move above significant resistance, which many of these stocks now face.

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Originally posted 14th February 2025