The Hang Seng Index on Monday was affected by worldwide signals, especially the soon-to-be-held U.S. Federal Reserve meeting and the announcement of Hong Kong's February 2025 unemployment rate. The index closed nearly 1% higher. This upbeat action came after China's better-than-forecast retail sales figures.

The Hang Seng TECH Index also increased by over 2% on March 14th, and remained largely flat Monday, reflecting the strength in the tech sector. Market sentiment seemed to be cautiously optimistic, waiting for more cues from the Fed and the local unemployment figures.

There's growing investor interest in ETFs tracking Chinese AI stocks as leaders like Baidu (BIDU  ) and Alibaba (BABA  ) continue to lead the charge in AI technology. Recent news reports showcase that there's a lot of excitement building up China's emerging sector in artificial intelligence.

Investors are anticipating a chance to benefit from China's tech success story as it competes on a global scale. China is blowing up thanks to tech, and there's potential for people who invest.

For American investors looking to get a piece of China's growing AI industry, ETFs following China's AI sector are becoming an increasingly appealing choice. A few of the prominent ETFs with large exposures to Baidu, Alibaba, and other Chinese AI companies include:

KraneShares CSI China Internet ETF (KWEB  ): One of the most popular China-tracking ETFs, KWEB offers exposure to large Chinese internet and technology giants, such as Baidu and Alibaba.

iShares MSCI China ETF (MCHI  ): This China ETF covers broad-based AI leaders and other Chinese blue-chip stocks, such as PDD Holdings (PDD  ).

Invesco Golden Dragon China ETF (PGJ  ): A U.S.-listed ETF that follows U.S.-listed Chinese firms, some of which are leading companies in AI development like Alibaba and Baidu.

Baidu's AI Breakthroughs

Baidu brought two new AI models to the market that highlight the company's push for leadership in the space. Over the weekend, Baidu introduced Ernie X1, a reasoning model that competes with DeepSeek R1 but at half the price. Additionally, the company launched Ernie 4.5, a multimodal foundation model that Baidu claims outperforms OpenAI's GPT-4.5 in multiple benchmarks while costing just 1% of its counterpart's price.

As part of its AI push, Baidu is releasing its Ernie Bot publicly for the first time ahead of schedule and intends to roll out its most recent models into its product ecosystem, including Baidu Search, China's leading search engine. These steps make Baidu a strong competitor in China's AI competition and could make it more appealing to ETFs with high exposure to the stock.

Alibaba's AI Surge

At the same time, Alibaba is also creating ripples in the AI world with its Quark AI assistant, which runs on its in-house Qwen reasoning AI model. Quark has been well-received on Chinese social media and is viewed as a potential "killer app" in the AI space.

In a dramatic move to deepen its technology advantage, Alibaba said last month it will invest $52 billion in cloud computing and AI infrastructure over the next three years. This is the biggest computing project ever funded by a single private firm in China and represents the country's overall drive to push the envelope for the top position in AI development.

Economic Rebound And AI Investments Drive Market Optimism

China's economy is shifting from pandemic-induced austerity to pro-growth policies to bolster the country's crucial sectors. China has set its 2025 GDP growth goal at 5%, with an emphasis on economic stabilization, like reviving the real estate sector after the Evergrande crisis.

This revival is evident in the Hang Seng Index, which recorded its first year-on-year gain in 2024 after 2021 and has continued to rally in 2025 with a 23% year-to-date return. The renewed optimism in the market, along with the fervent AI investment, is making China's technology sector more desirable to foreign investors.