Over the weekend, I traded notes with Marc Faber—global investor and editor of The Gloom, Boom & Doom Report. One snippet from our chat set the tone:
At major market tops, it isn’t uncommon to see the formation of anti-bubbles alongside bubbles. And those anti-bubbles can bottom when the bubbles peak. In fact, some of the greatest buying opportunities can take place at major tops such as 2000. If you look at some of the Old Economy rejects, the cheapest many of them ever got over the past 30 years was in March 2000.
This rings especially true right now. We’re witnessing one of the greatest collective delusions in modern history: American exceptionalism. It’s the unshakable conviction that the United States remains unmatched in technology, military power, democratic government, economic vitality, and cultural influence. Hubris and an aura of superiority run deep.
Meanwhile, the real story unfolding is the anti-bubble: China.
China’s Rise
The US side of this tale is starting to fray. The empire is stretched thin, drowning in debt, and distracted by endless political cage matches. Democracy has become a spectator sport and the economy groans under layers of government intervention—think stakes in Intel or “gifted” shares from OpenAI. As the AI semiconductor bubble goes parabolic, the broader narrative of superiority is cracking.
Enter China—the ultimate anti-bubble. No global empire to prop up. No endless election circuses. No woke distractions or bloated welfare systems sapping productivity. Instead, a pragmatic mixed economy that delivers results. And in innovation and technology? The progress is nothing short of breathtaking.
While many in the West keep their eyes closed, Chinese companies are advancing at warp speed in electric vehicles, batteries, robotics, chipmaking, AI models and more. Best of all? For investors, the stocks trade at absurdly cheap valuations. The MSCI China Index sits at about half its 2020 valuation—around 12x forward earnings.
US attacks on Chinese tech companies aren’t signs of strength; they’re desperate tells. The best innovators thrive on competition—they don’t build walls and beg for protection. Exhibit A: Chinese EVs are essentially banned in the US thanks to 100 percent tariffs (imposed at the end of the Biden administration) and strict rules on connected vehicle technology for “national security reasons.”
My VC friend Derek Au nailed it:
I can see the U.S. government banning Chinese models. This is why OpenAI is positioning itself for a bailout and trying to get itself more and more embedded into the government so it can claim systemic importance.
As if to prove his point, Anthropic just appointed former Fed chairman Ben Bernanke to its oversight body.
Mainstream financial outlets are slowly waking up. In late June, Barron’s ran a piece on China’s innovation surge:
Beijing’s bid for self-reliance remains a domestic growth driver. The country is becoming a leader in emerging technologies as its research and development outpaces the U.S. It’s also becoming an advanced manufacturing powerhouse for everything from large-scale industrial batteries to robotics—leading to its $2 trillion global trade surplus last year, despite U.S. tariffs.
“China is catching up—and fast—in areas like large language models and GPU designs,” says Vivian Lin Thurston, manager of the William Blair Emerging Markets Growth fund. Thurston, recently back from a visit to China and meetings with companies, was energized by what she saw. “It’s the only country in the world that has the entire AI ecosystem from beginning to end,” she says.
Barron’s highlighted battery giant CATL and electric vehicle powerhouse BYD:
BYD stock has been struggling. It’s down 36 percent since May 2025 as its domestic business felt the sting of price wars. But BYD’s lower-cost, high-range models have made it the best-selling global EV brand. Roughly half of sales are now overseas, according to analysts. And BYD is starting to manufacture outside China, including a factory under way in Hungary to sell cars tariff-free in Europe. . . At 13 times estimated 2027 profits, the stock is a bargain.
Investor’s Business Daily followed with a front-page essay on the US-China tech race. While still bullish on Silicon Valley, it admitted China is a “fast-growing threat.” China now produces roughly 50 percent more STEM PhDs annually than the U.S. and its hyper-competitive domestic market is survival of the fittest:
Joe Ngai, chairman of McKinsey in Greater China, argued in a recent CNBC interview, that the country is “the world’s toughest gym” for emerging companies, even more demanding than America’s rugged “cowboy capitalism” proving ground.
BYD was again spotlighted for its lower production costs ($4,703 per vehicle less than Tesla’s), vertical integration and the breakthrough Blade battery that made affordable, safe LFP (Lithium Iron Phosphate) technology viable.
The IBD piece also mentioned Unitree, expected to list soon on Shanghai’s STAR Market. This humanoid robot maker is scaling fast—nearing its 10,000th shipment. (Tesla, which unveiled its first Optimus humanoid in 2022, shipped 150 last year). As research firm SemiAnalysis put it, Unitree is executing the BYD playbook with a “level of scale and manufacturing that crushes the West’s costs and lead time. We are witnessing the birth of another Chinese hardware giant.”
As Louis-Vincent Gave, long-time Asia watcher and founder of Gavekal, likes to say, “When China enters a room, profits walk out.” Now imagine what that means for pricey American AI models. Chinese firms aren’t racing solely for the bleeding edge—they’re driving down prices and offering open-source solutions to capture global market share. Says Wendy Chang—senior analyst at the Mercator Institute for China Studies,
Instead of competing directly with companies like OpenAI, Anthropic and Google, who offer state of the art services at a premium, Chinese companies are pursuing a strategy of wide diffusion and cheap tokens to gain market share across the world.
Conclusion
Like any mixed economy, China is not without its flaws. Topping the list are too much local government debt, a shrinking population, and an unwinding property bubble. To its credit, the Chinese government has by and large allowed the real estate bust to run its course without Western-style stimulus and bailouts.
The Chinese innovation wave is just getting started. Global portfolio outperformance over the next 10, 20, 30 years will likely hinge on catching it early.
