It may be time to rethink the AI trade as two increasingly distinct AI ecosystems emerge around the US and China, according to a new analysis from Goldman Sachs.

“The narrative of a global AI duopoly is gaining traction among investors,” wrote strategists led by Kinger Lau in a note published on Sunday.

One ecosystem is centered on the US and its key trading partners, while the other is taking shape in China, reflecting geopolitical, national security, and growth considerations, they wrote.

The bank pointed to breakthroughs by DeepSeek and Kimi in large language models, alongside advances in semiconductor packaging and computing, biological engineering, and aerospace.

China is no longer just a major supplier to the global AI buildout, Goldman added.

It is also building an AI ecosystem spanning advanced chips, open-weight large language models, and AI applications that could compete with the US-led ecosystem, Goldman Sachs wrote.

“Importantly, the technology gaps between China and the West seem to be narrowing,” the strategists wrote.

While China remains several generations behind at the leading edge of semiconductors, it is “probably on par with, or even leading,” global competitors in parts of AI power, infrastructure, models, and physical AI applications, they added.

Grouping Chinese AI stocks

The changing landscape is reshaping Goldman’s AI investment framework.

Rather than treating AI as a single global investment theme, Goldman divides Chinese AI stocks into two groups: exporters tied to Western AI spending and domestic companies benefiting from China’s own AI investment, growing adoption, and policy support.

The exporters are more sensitive to global AI investment trends and geopolitics, while domestically focused companies are more closely tied to Chinese AI spending and government policy, Goldman’s strategists wrote.

Those differences are already showing up in market performance.

Chinese AI exporters gained 126% from early 2025 through June 2026 before falling 23% from their peak during the global AI selloff.

Domestic AI companies have held up better since the correction, according to Goldman’s analysis.

Since the “DeepSeek moment” in early 2025, nearly $5 trillion in market value has been created in Chinese AI-related public equities through share price gains and IPOs, according to Goldman.

AI-related stocks now account for 42% of the combined stock market value of Chinese stocks listed in mainland China and Hong Kong, up from 24% in 2024, according to Goldman Sachs.

Their share of trading turnover has risen to 57% from 48%.