Asia-focused hedge funds have emerged as some of the biggest beneficiaries of the artificial intelligence boom, with several delivering triple-digit returns in the first five months of 2026. According to reports from The Economic Times and Reuters, Hong Kong-based WT Asset Management's long-short China Focus fund generated a net return of 103% between January and May, aided by a gain of more than 20% in May alone. The firm's long-only fund advanced 67.5% during the same period. E20 Capital, which was launched in 2025, delivered a net gain of 136% in the first five months of the year, while Trivest Advisors generated an 88.9% return during the January-May period. WT's assets under management have expanded rapidly and now stand at around $10 billion, as reported by Reuters.
The strong performance was driven by investments in AI hardware companies and Chinese technology firms, including semiconductor manufacturer Hua Hong Semiconductor and AI agent developer Knowledge Atlas, also known as Zhipu AI. As reported by The Economic Times and Reuters, public filings show WT was a cornerstone investor in Zhipu AI, whose shares have surged more than 1,000% year-to-date following its Hong Kong market debut in January. E20 Capital's performance was supported by investments in memory-chip makers, optical technology companies and CPU-related businesses through its flagship Global Opportunity Investment Fund, which manages approximately $2 billion in assets. Market participants noted that regional funds were quicker to spot supply-side constraints as Asia covers nearly the entire semiconductor stack, allowing them to position early and capture opportunities across AI subsectors.
While AI-focused hedge funds thrive, Chinese stocks listed in Hong Kong are experiencing significant underperformance as investors increasingly favor AI supply chain players. According to Bloomberg, a measure of Chinese shares listed in Hong Kong has fallen nearly 9% this year, ranking among the worst performers of more than 90 global equity gauges tracked by Bloomberg. The MSCI China Index is nearing a bear market, having dropped 18% from its October peak. "The indices are measuring the wrong side of the economy," said Hao Hong, chief investment officer at hedge fund Lotus Asset Management Ltd. "The constituents are mostly old economy stocks with little AI exposure, so nobody is paying attention to them." Unlike benchmarks in Taiwan and South Korea, where semiconductor firms account for at least half of index weightings, financial shares make up more than 28% of the Hang Seng China Enterprises Index, while consumer names make up nearly 23%. Even the Internet sector that once drove enthusiasm for offshore Chinese equities is losing momentum, with companies including Alibaba Group Holding Ltd. and Tencent Holdings Ltd. reporting revenue for the March quarter that fell short of estimates amid big investments in AI.
The strong gains underscore that the AI-driven market rally has remained resilient despite bouts of volatility triggered by geopolitical tensions, including the conflict in Iran. According to The Economic Times and Reuters, rising demand for AI infrastructure and supply-side constraints across the semiconductor industry have helped propel technology stocks higher, driving benchmark indices in Japan, South Korea and Taiwan to record levels. WT's assets under management have expanded rapidly and now stand at around $10 billion, as reported by Reuters. The performance highlights how market volatility induced by the Iran war has not derailed the AI-driven rally this year, as growing demand and tight supply lifted stocks and pushed Japan, South Korea and Taiwan to record highs. The broader market backdrop has been supportive, with China's benchmark Shanghai Composite Index climbing to its highest level in more than a decade, while South Korea's KOSPI has nearly doubled this year.
Experts told The Economic Times that Asia continues to offer significant opportunities for investors seeking outsized returns, noting that many AI supply-chain companies in the region remain under-researched and receive limited attention from international investors. Navin Raj Jaidev, a senior investment director at Cambridge Associates, said Asia offers increasing opportunities to deliver outsized returns, as many AI supply-chain firms in the region "remain under-covered and under-recognised by global investors." He added that themes such as corporate governance reforms and block-trade opportunities are gaining traction among institutional investors across Asian markets. The analysis suggests that when firms are under-followed, prices don't always adjust smoothly as new facts arrive, instead repricing in steps as analysts raise profit forecasts and investors pay higher valuations once growth looks more durable. Some analysts see scope for a rebound in China's offshore shares, citing cheaper valuations with the HSCEI now trading at about 10 times forward earnings compared to 20 times and 17 times for benchmarks in Taiwan and Japan, respectively. However, recent measures have revived worries over crackdowns on competition, with Goldman Sachs Group Inc. downgrading H-shares this month, citing rising opportunity costs as investors find more attractive opportunities elsewhere.
