China’s Latest Surge in Tech Stocks Signals a Shift Away from Economic Slowdown

China’s Tech Surge Fuels Stock Market Gains

As 2026 begins, China is experiencing a surge in technological innovation that is energizing its stock market, despite ongoing economic challenges. Nearly a year after DeepSeek’s AI advancements shook global markets, new breakthroughs in areas like commercial spaceflight, robotics, and aerial vehicles are driving strong performance in Chinese tech equities.

Chinese technology stocks have started the year with impressive momentum. A domestic tech index, modeled after the Nasdaq, has risen by nearly 13% this month, while an index tracking Chinese tech firms listed in Hong Kong is up almost 6%. Both have outpaced the Nasdaq 100’s gains.

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Domestic innovation has become the primary catalyst for China’s stock market rally since April, even as the country’s property sector and consumer spending remain weak. The momentum could strengthen further as DeepSeek prepares to launch a new AI model and China readies a five-year plan focused on technological independence.

“The stock market is signaling that China’s technological progress will be very exciting in the future,” said Mark Mobius, managing director at Mobius Emerging Opportunities Fund, in an interview with Bloomberg TV. “China’s ambition is to surpass the US in advanced technology, especially in chips and artificial intelligence, and investment is following that vision.”

Since DeepSeek introduced its affordable, high-performing AI models in January last year, other Chinese companies have accelerated their own AI development. Major internet firms like Alibaba and Tencent have rapidly adopted generative AI technologies.

Chinese robotics have also made headlines, with robots participating in marathons, boxing matches, and traditional dance performances. In manufacturing, advanced language models are being integrated into cutting-edge equipment, including flying taxis and precision tools. These developments are transforming China’s image from a low-cost manufacturing hub to a serious contender in global technology, attracting investors seeking the next growth opportunity.

According to Jefferies Financial Group, a group of 33 Chinese AI companies saw their combined market value increase by approximately $732 billion over the past year. Jefferies believes there is still significant room for growth, as China’s AI sector currently represents just 6.5% of the US market capitalization.

IPO Boom and Future Prospects

The excitement is not limited to the secondary market. Several Chinese AI-related firms have made strong debuts on public exchanges, encouraging more companies to consider going public. Upcoming listings include Xpeng’s flying car division, LandSpace Technology (a rocket manufacturer), and BrainCo, which could become a competitor to Neuralink.

Joanna Shen, an investment specialist at JPMorgan Asset Management, predicts that the next major leap in AI will occur at the application level. “China is especially well-placed to lead this shift, given its wide range of use cases across wearables, edge devices, and online platforms,” she said.

Read more: JPMorgan Asset Sees ‘More DeepSeek Moments’ Ahead for China Tech

Valuation Concerns and Regulatory Response

The rapid rise in tech stocks has sparked worries about inflated valuations. For instance, Cambricon Technologies, a Chinese AI chipmaker competing with Nvidia, is trading at roughly 120 times forward earnings. An index tracking Chinese robotics firms is valued at over 40 times forward earnings, well above the Nasdaq 100’s 25 times.

In response, Chinese regulators have tightened rules on margin financing, signaling concern over speculative activity, particularly in the tech sector.

Despite these risks, some investors remain bullish on China’s tech industry, citing advantages like low production costs and strong government support.

“China’s cost-effective approach to AI could yield results more quickly than in the US,” wrote Tilly Zhang, a technology analyst at Gavekal Research. “The ‘DeepSeek moment’ has encouraged China to focus on affordable, sufficiently capable models.”

The anticipated launch of DeepSeek’s R2 model this quarter could be a major catalyst, as it is expected to deliver top-tier performance at a very low price. Bloomberg Intelligence notes that this release could once again disrupt the sector and reinforce China’s status as the primary challenger to US dominance in AI.

China’s upcoming five-year plan, set for release in March and emphasizing technological self-sufficiency, may provide further reasons for investors to remain optimistic.

Vivian Lin Thurston, a portfolio manager at William Blair Investment, believes Chinese stocks could continue to outperform US counterparts if earnings growth accelerates, particularly in advanced technology and export-driven sectors. “I anticipate attractive investment opportunities in areas such as internet, AI, semiconductor hardware, robotics, automation, and biotech, as we saw in 2025,” she said.

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