China’s AI-driven stock rally is drawing support from Wall Street strategists, who say the newfound tech prowess will help extend a bull run.
Strategists from Morgan Stanley, JPMorgan and UBS expect stock gains spurred by DeepSeek’s artificial intelligence model to continue. The global shock and awe over the Chinese startup has triggered a fundamental rethink over the market’s attractiveness, challenging previous assumptions that the nation is lagging behind in cutting-edge technologies.
“Global investors are starting to reassess China’s investability within the tech and AI space, after an extended period of limited attention,” Morgan Stanley strategists including Laura Wang wrote in a note dated Tuesday. “We expect the momentum to sustain in the near-term given global investors’ light positioning.”
The MSCI China Index has risen about 15 percent from a January low, outperforming its Asian peers this year. A gauge of Chinese tech shares listed in Hong Kong entered a bull market last week.
The growing optimism has spurred a flurry of buy-side action, luring hedge funds and managers like Fidelity International. While China has a long way to go to prove that the AI hype can benefit the broader private sector, the buzz at least helped offset downside pressure coming from trade tensions.
Based on the experience during the 4G, 5G and cloud computing eras, “it would seem that we are less than halfway through the rally” driven by DeepSeek, UBS strategists including James Wang wrote in a note dated Wednesday. Ample liquidity and lower interest rates should help AI-related names to further re-rate, they added.
The upbeat views contrast the cautious sentiment prevalent just a few months ago, when global banks warned of further downside risks in the wake of Donald Trump’s election victory and China’s lingering economic woes.
To be sure, Morgan Stanley’s Wang warns there will be a divergence in performances between tech and non-tech names, with the latter weighed down by persistent deflationary pressure.
Meanwhile, JPMorgan strategists including Rajiv Batra noted that fund flows into Chinese internet names have been positive this year, with a surge following the DeepSeek shock. “We see a window of opportunity in Asia over the coming months, with another tactical rally in China driving upside,” they wrote.
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