China barring its tech companies from using NVIDIA’s AI chips isn't just another trade skirmish. It’s more evidence of a fundamental shift that's reshaping how investors need to start thinking about incremental tech allocation.
For now, the razzle-dazzle of the US technology sector is still handsomely rewarding market participants but Silicon Valley exceptionalism and California’s monopoly on creating further outsized returns could begin to wane.
With US tariffs weaponising chips and patents, countries and regions are building parallel first-class ecosystems in their areas of expertise.
Figure 1. Regional tech valuations: Asia leads on growth and value
Source: Bloomberg, as of 22 September 2025.
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This is a bigger global shift than a “mere” China-US chips war and upends decades of investment thinking. Global tech portfolios were 80% US focused because the model was simple: innovation happened in Silicon Valley, manufacturing in Asia, sales worldwide. The remaining 20% either supported the US tech ecosystem or replicated US models elsewhere.
This concentration made sense. US venture capital and research capabilities were unmatched and regulatory stability meant investors could back long-term innovation without political risk. When Intel, Microsoft, or Apple made design shifts, Chinese component makers and European semiconductor companies felt immediate impacts.
Why this time is different
Today's China actually has the building blocks to follow through on its NVIDIA ban. More than half of AI research scientists in the world are now Chinese and this number is likely to grow given China produces twice as many high school graduates as the US today. Incidentally, India produces four times as many.
While the weaponisation of tech tariffs such as those on China, Japan and Europe, or the proposed US$100,000 H1B visa fees that disproportionately impact Indian IT services, fractures previously stable relationships and the tech status quo, it also accelerates the push for tech sovereignty.
Investment implications
China is already head and shoulders above the rest of the world on clean energy and electric vehicle (EV) technologies and is now doubling down on semiconductor manufacturing and design.
India has pivoted from being the world's IT outsourcing hub to innovating in fintech, while building a healthy domestic e-commerce industry to serve its consumer-led economy. Japan continues building on its robotics dominance. In biotechnology and wearable tech like smart watches or smart glasses, Europe's leadership is reflected in US tech partnerships and VC funding flows.
As Europe holds a more neutral position in the US and China trade tensions, it can profit from demand for its precision tools while serving as an end market for competitively priced, tariff-free electric cars, smartphones, and robotics from both sides.
The US tech sector has historically commanded premium valuations partly due to its stable macroeconomic backdrop. The high US risk-free premium was underwritten by predictable trade, political, and regulatory policies – essential for long-term tech innovation without policy uncertainty. Recent policy volatility has eroded this premium, while other regions now offer more predictable policy environments.
That begs the question: why should the US retain its risk-free premium advantage?
For investors, this invites a shift from US-centric allocation towards identifying regional champions. The question isn't whether to diversify beyond Silicon Valley, but rather which regional advantages will scale globally first.
All data sourced from Bloomberg unless otherwise stated.
Author: Sumant Wahi, a technology industry Portfolio Manager at Man Group.
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