China’s Tech Stocks Surge After AI Breakthrough – What It Means for Global Markets
DeepSeek’s AI Sparks a Bull Market for Chinese Tech
Chinese technology stocks have entered a bull market following a groundbreaking artificial intelligence (AI) development by DeepSeek. In the past month, the Hang Seng Tech Index—which tracks the 30 largest tech firms in Hong Kong—has risen 25%, surpassing the Nasdaq 100’s 4.4% growth and significantly outperforming the US “Magnificent Seven” tech giants, which saw a 0.5% decline.
The surge has renewed global confidence in Chinese technology, demonstrating that AI advancements are not exclusive to the US. Investors are increasingly turning to China’s tech sector, drawn by the potential of low-cost, high-performance AI models.
Alibaba, Xiaomi, and Baidu Among the Big Winners
China’s internet and AI-driven companies have been the biggest beneficiaries of this shift. Several tech giants have seen substantial stock price increases in the past month:
- Alibaba: +43%, bolstered by reports of a partnership with Apple to launch AI features in China.
- Xiaomi: +34%, benefiting from increased AI integration in its consumer electronics.
- Baidu: +13%, as China’s leading search engine embraces AI-driven search capabilities.
- BYD: +40%, as AI innovations fuel the electric vehicle market.
- JD.com and Meituan: +24% and +11%, respectively, driven by strong consumer demand during the Lunar New Year.
Meanwhile, the broader Hang Seng Index has climbed 15%, reflecting overall optimism in the Chinese economy.
What’s Driving the AI-Fuelled Market Boom?
DeepSeek’s low-budget AI model has forced a re-evaluation of the AI industry, proving that China can develop competitive AI systems without the vast computing power traditionally used by US firms like Nvidia and OpenAI.
This revelation shook the global tech market, causing a massive sell-off in US AI stocks. On 27 January, Nvidia lost $589 billion in market value—the largest single-day loss in history. In contrast, Chinese tech stocks skyrocketed, as investors saw a future where China could massively scale AI technology at lower costs.
Beijing is also expected to introduce large-scale stimulus measures, further encouraging AI adoption across China’s tech sector.
US AI vs. Chinese AI: The New Global Tech Battle?
The rise of Chinese AI has geopolitical and economic implications, especially under Donald Trump’s administration. Trump has already imposed aggressive tariffs on China, and there are concerns that he may further restrict AI collaboration between US and Chinese firms.
Potential scenarios under Trump’s AI policy:
- Stronger US AI Investments – Trump may push for increased government funding in AI development to counter China’s progress.
- Tighter Export Controls – The US could ban AI chip exports to China, making it harder for Chinese firms to access cutting-edge hardware.
- Regulatory Challenges – Chinese AI companies operating in the US may face stricter regulations, reducing their ability to expand internationally.
- Tech Alliances with Europe – The US may seek closer AI cooperation with European nations to maintain dominance in the industry.
While China has historically been seen as a follower in AI innovation, its ability to scale and commercialise AI faster than the US could pose a serious challenge to American tech dominance.
Conclusion: What’s Next for AI and Global Markets?
The DeepSeek breakthrough has marked a turning point for Chinese technology, proving that the country can compete with Silicon Valley in AI. Investors are increasingly betting on Chinese tech firms, leading to a significant shift in global market sentiment.
However, this AI arms race between China and the US could escalate into a major trade and technology battle, especially with Trump’s administration likely to take a hardline stance on Chinese tech.
For now, the AI market remains highly volatile, and global investors will be watching closely to see whether China can sustain its momentum—or if the US will strike back with tougher AI regulations.
One thing is certain: the future of AI will be shaped by competition between these two global superpowers.
Sources: (FT.com, BBC.co.uk, ChatGPT)
