China’s tech stocks are ripping higher while the rest of the world tries to figure out what’s happening. Been a year since DeepSeek dropped its shock AI model, China is flying into 2026 with a fresh round of tech milestones and a market that doesn’t care how weak the economy looks. A Nasdaq-style index of local Chinese tech stocks has jumped nearly 13% just this month. A second gauge tracking Hong Kong-listed Chinese tech firms is up 6%. Both are leaving the Nasdaq 100 behind. And this is happening while the economy is stuck. Housing is still a disaster, and consumers aren’t spending. AI stocks jump as investors bet on Chinese-made breakthroughs The real fireworks started last January when DeepSeek released its low-cost AI model. It worked just as well as its Western peers and cost way less. That one launch rattled global markets and lit a fire under China’s entire tech ecosystem. Since then, local firms haven’t looked back. Giants like Tencent and Alibaba quickly embraced generative AI. Others raced to develop their own versions. Now it’s everywhere. Chinese AI firms aren’t just building chatbots. They’re embedding large language models into machines, tools, even flying cars. Some robots have run marathons, boxed in demo fights, and danced in folk shows. In factories, AI is showing up inside precision machine tools and next-gen equipment. Investors are no longer seeing China as just a cheap labor hub. It’s now looking like a serious rival to US tech. That shift is visible in the numbers. Jefferies tracks 33 Chinese AI stocks. Their market value has exploded by $732 billion in the past year. And Jefferies thinks that number could grow much more because Chinese AI companies still make up just 6.5% of the market cap of their U.S. counterparts. Public listings are heating up too. A bunch of new AI-related IPOs have seen huge gains. That’s encouraging more firms to go public. Companies in the queue include Xpeng’s flying-car division , rocket maker LandSpace Technology, and BrainCo, a firm being called a possible rival to Neuralink. Tech valuations stretch as Beijing tries to slow speculation Of course, not everyone’s thrilled. Some stocks look way too expensive. Cambricon Technologies , an AI chip company competing with Nvidia, is trading at around 120 times forward earnings. A separate index tracking Chinese robotics is trading at 40 times forward earnings, higher than the Nasdaq 100, which sits around 25. Regulators are watching. Beijing just tightened margin financing rules, a clear signal that they’re worried about speculation getting out of hand. Most of the heat is in the tech sector. The message is simple: they don’t want a bubble. Still, some investors are holding their ground. They point to low labor costs, strong central planning, and government backing as reasons to stay long on China’s tech. Outside of tech, things are bleak. New economic data expected Monday will likely confirm that investment is shrinking, and consumer spending is weak, even as exports remain strong. Economists in a Bloomberg poll predict fourth-quarter GDP growth of 4.5%, the worst since China reopened after the Covid lockdowns. For the full year, growth is expected to come in at 5%, hitting Beijing’s official target. But that number hides the truth. Once you strip out price changes, nominal growth could be just 4%, dragged down by deflation. That would be the slowest pace in half a century, except for 2020. Economist Raymond Yeung at Australia & New Zealand Banking Group said last week that the negative GDP deflator means supply is far outpacing demand. “A negative GDP deflator suggests excess aggregate supply in the economy,” he said in a research note. If you're reading this, you’re already ahead. Stay there with our newsletter .
