Back in June 2025, the China AI Deployment 10 – or CHAD-10 – basket was added to the Finimize Portfolio, designed to capture China's ambitious push to embed artificial intelligence across everything from consumer platforms and cloud computing to electric vehicles and robotics. But the trade hasn't worked out as hoped: the basket is down 20% since inception. Now, a new, updated basket has taken its place, reflecting a shift in how investors are approaching China's AI story.
Why the old basket stumbled
The CHAD-10's biggest holdings – Baidu, Alibaba, and Tencent – have poured billions into AI infrastructure and research. Yet that heavy spending hasn't translated into stronger share prices. Investors have grown wary of the gap between AI investment and tangible returns, a concern that's not unique to China. In the US, similar worries have weighed on tech giants, but the effect has been more pronounced in China, where competition is fierce and margins are thinner.
In the electric and autonomous vehicle space, which was another pillar of the basket, the picture was even more challenging. A crowded market has led to intense price wars, squeezing profit margins and hurting even the companies expected to benefit most. The result: a basket that was supposed to ride a powerful secular trend instead delivered losses.
What the new basket changes
The new basket is a recognition that the old approach – simply picking the biggest names in China's AI ecosystem – may not be the best way to play the theme. While the specific constituents of the new basket haven't been detailed, the shift signals a move toward companies that are more likely to convert AI spending into earnings growth, rather than just those with the largest AI budgets.
This kind of refresh is common in thematic investing. When a theme is young, investors often buy the most obvious names. But as the theme matures, the market becomes more discerning, rewarding companies with clear monetization paths and punishing those that are merely spending heavily without visible returns.
What it means for investors
For everyday investors, the CHAD-10's stumble is a reminder that thematic baskets – even those built around powerful long-term trends – can be volatile and don't always deliver in the short term. China's AI push is real, but the path to profitability is uneven. The new basket aims to better capture the opportunity, but it's no guarantee of success.
Investors should also note that China's tech sector has been sensitive to broader market forces, including moves in US tech stocks like Nvidia and upcoming US inflation data, which can sway sentiment globally. The ongoing trade tensions and regulatory shifts in China's EV market also add layers of risk.
The key takeaway: don't assume a thematic basket is a set-and-forget investment. The new China AI basket may offer a better fit for today's market, but investors should keep an eye on how its holdings are actually performing, not just on the theme's promise.
Looking ahead
As the new basket gets to work, investors will be watching whether it can avoid the pitfalls that tripped up CHAD-10. The success of China's AI deployment will ultimately depend on whether companies can turn their massive investments into products and services that people pay for. Until then, the trade remains a bet on the future – one that requires patience and a tolerance for volatility.
