Chinese AI stocks have gained $732 billion in value while housing crashes and consumers stop spending
China’s economy is struggling. Housing prices keep falling. Consumers aren’t spending. Youth unemployment remains high. Yet the country’s technology stocks just posted a 13% gain in January alone, leaving American tech stocks in the dust.
An onshore tech gauge shot up almost 13% this month. Hong Kong-listed Chinese tech firms climbed nearly 6%, both outperforming the Nasdaq 100. The divergence is striking. The world’s second-largest economy remains mired in crisis, but investor enthusiasm for homegrown technology has created an equity bull run that started last April and shows no signs of stopping.
The catalyst arrived almost exactly a year ago. DeepSeek shocked global markets with its breakthrough AI model on January 27, 2025. Since then, Chinese firms have accelerated efforts to develop their own versions, triggering a full-blown technological arms race. The impact transformed investor perception of China from low-cost manufacturing base to credible challenger of U.S. tech leadership.
In a basket of 33 Chinese AI stocks tracked by Jefferies, the rally expanded their combined market value by about $732 billion over the past year. That wealth creation happened while traditional economic indicators remained negative. Industrial production slowed. Retail sales disappointed. The property sector continued its multi-year collapse.
The Hang Seng Tech Index jumped 23% in 2025, with momentum accelerating into the new year. Shanghai Biren Technology’s stock market debut showed the intensity. Shares surged nearly 120% by midday Friday after the AI chip designer raised $717 million in its Hong Kong IPO. The retail portion was subscribed over 2,300 times.
The frenzy extends beyond AI chips. Chinese robots have competed in marathons, sparred in boxing matches, and performed folk dance routines. In manufacturing, large language models are being embedded into flying taxis and precision machine tools.
Beijing made technological self-reliance a national priority after U.S. export controls restricted access to advanced Nvidia chips. Washington’s tightening restrictions have fueled the boom by accelerating demand for domestic alternatives. What was intended as strategic constraint instead catalyzed China’s domestic semiconductor industry.
“Nvidia’s once-dominant position in China’s AI chip market has effectively evaporated in 2025, marking a seismic shift in the global intelligent-computing landscape,” according to an analyst report.
Startups like Cambricon, Moore Threads, and Metax have drawn billions in funding as they race to supply chips for data centers and AI applications. The surge in capital is minting billionaires at breakneck speed even as the broader economy sputters.
China’s five-year economic plan due for release in March will place great emphasis on technological self-sufficiency, potentially offering another catalyst. The blueprint is expected to prioritize AI development, semiconductor manufacturing, and advanced manufacturing.
The explosive rally has triggered concerns about stretched valuations. Cambricon Technologies trades at about 120 times forward earnings. A gauge tracking Chinese robots trades at more than 40 times forward earnings, higher than the Nasdaq 100’s 25 times multiple.
Beijing’s latest decision to tighten margin financing signals growing unease with speculative excess. Chinese regulators have painful memories of previous market bubbles that ended in crashes, wiping out retail investors.
However, some analysts argue fundamentals justify premium valuations. “China’s low-cost model for AI may well pay off faster” than U.S. peers, according to Gavekal Research’s Tilly Zhang. “The ‘DeepSeek moment’ encouraged China to focus on a strategy of cheap, good-enough models.”
While American companies pour hundreds of billions into cutting-edge AI infrastructure pursuing marginal performance improvements, Chinese firms are demonstrating that “good enough” models at dramatically lower costs can capture enormous market share.
Expected within this quarter, DeepSeek’s R2 model may provide the next catalyst. The new model will likely boast leading-edge performance at ultra-low cost, potentially disrupting the sector again.
Hong Kong is emerging as the key venue for this fundraising drive. At least 25 companies made market debuts in Hong Kong last month, marking the busiest month for IPOs since November 2019. Baidu’s AI chip unit has confidentially filed for a Hong Kong listing.
The paradox at the heart of China’s tech boom is how thoroughly disconnected it remains from broader economic conditions. Consumer confidence sits near historic lows. The property sector continues contracting. Local government debt burdens weigh on public investment.
Yet technology stocks soar on visions of AI-powered transformation and robotic manufacturing. The disconnect reflects two possible realities. Either tech investors see beyond current weakness to a future where AI drives productivity gains, or they’re engaged in speculative mania detached from economic fundamentals.
The truth likely combines both. China’s technological capabilities have genuinely advanced, creating real value. Simultaneously, retail investor enthusiasm and margin-fueled speculation have driven valuations beyond levels justified by near-term earnings.
For now, Chinese tech stocks are leaving both economic malaise and global competitors behind, betting that self-reliance and cost innovation trump unlimited capital and cutting-edge chips. The market is rewarding that bet handsomely. Time will tell if the confidence proves justified.
