We recently published a list of the 10 Best Performing Chinese Stocks So Far in 2025. In this article, we are going to take a look at where Zhihu Inc. (NYSE:ZH) stands against the other Chinese stocks.
Chinese stocks have rallied in 2025 since the surprising launch of the DeepSeek AI model. The smart and lower-powered LLM AI tool has created a wave in the global AI industry, with the U.S. stock market losing over $1 trillion right after the DeepSeek launch.
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China’s Ready to Embrace the Tech Sector
Chinese stocks have continued their momentum weeks after the launch of DeepSeek as China’s President Xi Jinping recently held meetings with Chinese tech and start-up leaders, indicating a more friendly approach to the sector. According to a Bloomberg report, the meeting included Alibaba co-founder Jack Ma and DeepSeek founder Liang Wenfeng. Ma’s presence was the highlight as investors saw it as a positive sign that Chinese officials were ready to embrace the tech sector. Ma has had a history with the Chinese government for speaking out against regulators, therefore, his presence is considered a symbolic gesture.
According to reports, Jinping has given a green signal to tech start-up leaders to remain competitive and ensured that the government would not impose unwarranted fines.
“The decision to call for such a meeting likely indicates the importance of technology innovation and the contribution of private enterprises to the development and growth of China’s economy. We view the emphasis on internet and tech providing valuation multiple support for China’s internet sector,” Citigroup analysts wrote in a research note, as per Bloomberg.
Despite the Chinese economy facing deflationary headwinds and a struggling property market, Hong Kong’s Hang Seng Index has surged over 15% year-to-date, driven by Chinese tech stocks.
Do Chinese tech stocks hold the potential to deliver a full-year rally driven by the AI boom, similar to the rally U.S. tech stocks experienced in 2024? Well, Chinese companies have the potential, and DeepSeek has proven what Chinese tech start-ups are capable of doing. However, China’s economy is in a very different place from the United States, and regulation can be difficult to predict.
A busy street with pedestrians and cars, a billboard advertising the public company’s services in the background.
Our Methodology
We used the Finviz screener to shortlist 20 companies with a market capitalization of over $300 million. We ranked the 10 best-performing Chinese stocks with the highest returns year-to-date in ascending order of the YTD returns, as of February 19. We have also listed the number of hedge funds holding these stocks as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Zhihu Inc. (NYSE:ZH)
No. of Hedge Fund Holders: 8
YTD Returns: 56.35%
Zhihu Inc. (NYSE:ZH) is another Chinese holding company that operates an online content community. The company is mainly engaged in the provision of advertising services, paid membership services, content monetization solutions, and other services. Zhihu also offers technology, business support, consulting, information transmission, software, IT, and internet services.
Zhihu Inc. is emerging as a leader in China’s content-driven online community, with its core focus on AI and high-quality content creation driving user engagement and positioning the company for profitability. The company is unprofitable but has reduced its losses over the past five years by 15.2% annually. This shows the company’s potential for improvement despite ongoing losses. In Q3 2024, the company indicated to reach break-even in Q4, after a robust performance during the quarter.
During Q3, the company’s paid membership revenue was reported at around 459.4 million yuan, a rise of 11.5% year over year and added 16.5 million new members to the platform. The company’s user engagement also shows significant progress, with daily active user time span increasing by almost 20% year over year. The company’s increased traffic reflects the strong growth in its AI-driven features.
Zhihu Inc.’s (NYSE:ZH) gross profit margin was around 63.9%, a significant milestone as it reached its highest point since its listing. To reduce its losses, the company reported a substantial reduction in total costs and operating expenses, decreasing by more than 35.6% and 30.5%, respectively.
Overall, ZH ranks 8th on our list of best performing Chinese stocks to buy right now. While we acknowledge the potential of ZH as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
