A.I. Is Driving a Stock Market Rally in China, Too

Last year, investors in Chinese stocks lurched between euphoria and disappointment as the market swerved in response to the government’s attempts to kick-start growth in China’s sluggish economy.

Now, China’s stock markets are in the midst of another bullish run. Analysts and investors say that this time, rather than being driven mainly by policy changes, the moves are linked to a trend that is also pushing up stocks in the United States and elsewhere: artificial intelligence.

“There has been a resetting of expectations around what the government will and won’t do to stimulate the economy,” said Eric Wong, the founder of Stillpoint Investments, a hedge fund. “That has enabled people to be more comfortable to put money into parts of the economy where they think there is outsized growth.”

The share prices of companies that play a major role in China’s A.I. industry have grown by triple digits this year. Alibaba, which makes widely used open source A.I. systems, has gained more than 120 percent this year. Semiconductor Manufacturing International Corporation, China’s most advanced chipmaker, is up even more, around 180 percent. Other Chinese tech stocks, including Baidu, Tencent and Xiaomi, are up around 60 percent this year.

The A.I.-driven rally in tech stocks has exerted an enormous influence on broad market indexes in China, as it has in the United States. The MSCI China Index, which tracks the country’s largest companies, has notched gains for five straight months. The index is up more than 40 percent this year, greatly outpacing a similar index for U.S. stocks, which is up about 15 percent.

The Chinese index has become dominated by tech companies, with Tencent, Alibaba and Xiaomi, the three largest components, accounting for about 30 percent of the benchmark. In America, the top three stocks are Nvidia, Microsoft and Apple, worth about a fifth of that index.

For years, China’s stock markets were among the worst performing in the world. Then, in September last year, shares surged after the government encouraged banks to lend more to buyers of stocks and real estate.

In January, stocks began to rally again after the Chinese start-up DeepSeek jolted the tech world with its claim that it created a powerful A.I. model that was significantly cheaper to build than the offerings of its better-funded American rivals.

Since then, Alibaba has released multiple popular A.I. models. Open source A.I. systems made by Chinese companies consistently rank among the top performing in the world. Chinese companies with significant A.I. and cloud businesses, including ByteDance, Alibaba, Tencent and Huawei, have poured money into infrastructure like data centers.

The Chinese government, too, has financed A.I. infrastructure and hardware, including data centers, high-capacity servers and semiconductors, as part of a push to become self-sufficient in advanced technologies.

China “has strong national policy support, vast data resources, sufficient power supply, leading manufacturing capabilities, diverse A.I. application scenarios and a fiercely competitive private sector,” said Winnie Wu, chief China equity strategist at BofA Global Research, a unit of Bank of America. She described China as the “global runner-up in A.I.”

But Chinese regulators have doubled down on a directive for companies building data centers to buy domestic chips instead. China’s stock markets took that “as a signal that China wants to build its own ecosystem,” said Mr. Wong of Stillpoint Investments.

Initial public offerings by Chinese tech companies, once blockbusters on Wall Street, have slowed in recent years as the relations between China and America deteriorated. And in China, the pace of domestic listings dipped as Beijing pushed to assert greater control over the market.

The recent market momentum is attracting interest from Chinese tech companies looking to go public in Shanghai or Hong Kong.

Last week, the Shanghai Stock Exchange approved the listing of Moore Threads, a Chinese semiconductor company. Unitree Robotics, a start-up based in the tech hub of Hangzhou, said last month that it would pursue a listing by the end of the year.

Vey-Sern Ling, an equities adviser based in Singapore at the private bank Union Bancaire Privé, said, “For any Chinese tech company planning to go to the market right now, Hong Kong would be the clear choice.”

Xinyun Wucontributed research from Taipei.

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