China AI: What If Good Enough Wins?
The Other AI Trade
Everyone is watching Silicon Valley. Few are paying attention to what is happening in China.
Growth stocks are breaking out, AI infrastructure spending is exploding and deployment is accelerating across the economy. The race may not be as one-sided as many assume.
China can tech
ChiNext is ripping. The index has rallied roughly 10% over the past five sessions and pushed through major resistance overnight. The big trend remains intact, and there is still considerable room before we reach channel highs.
ChiNext is essentially China growth. Think semis, AI, healthcare, EVs and advanced manufacturing rather than banks, property and old-economy China.
Source: LSEG Workspace
Leaving NDX way behind
Chinese tech is very much alive, just not in the names most investors are used to. The leaders are increasingly AI infrastructure, optical networking, advanced manufacturing and semiconductor-adjacent companies rather than the traditional BAT (Baidu, Alibaba, Tencent) names. ChiNext has surged roughly 67% over the past year, versus about 37% for the Nasdaq 100.
Source: LSEG Workspace
Speculation
Chinese equities remain tightly linked to speculative activity. The ChiNext Index and China's margin trading debt are both pushing into fresh all-time highs, a sign that risk appetite remains alive and well.
Source: LSEG Workspace
Be a star
STAR50 has surged almost 20% from the June lows in just a few sessions. Momentum remains firmly in the bulls' favor, with the rally showing few signs of exhaustion.
Source: LSEG Workspace
China's NVDA
Remember the squeeze in Cambricon (China's NVDA) last August? The stock has done it again, squeezing hard, leaving NVDA way behind.
Source: LSEG Workspace
China AI
China's AI infrastructure buildout is accelerating rapidly. JPM forecasts AI data center capex to rise from roughly $20 billion in 2024 to $151 billion by 2029, driven by a policy push to embed AI across most of the economy by 2030.
The story is less about frontier model breakthroughs and more about deployment at scale. Supporting that view, JPM expects China's domestic AI inference token demand to grow at roughly 330% CAGR through 2030, fueled by massive infrastructure investment and growing adoption across industries.
Source: JPM
Catch up?
JPM argues the market is pricing Chinese AI players as being roughly 9-12 months behind U.S. leaders and steadily catching up. The risk is that the next generation of U.S. models delivers a major leap that re-widens the gap.
The bull case is that AI becomes a scale game. China is rapidly building infrastructure, inference demand is exploding, and the country produces roughly 1.5 million engineers per year versus 150,000-200,000 in the U.S.
Need Porsche to go buy milk?
Anthropic's flagship Claude Fable 5 model scores 60 on Artificial Analysis' Intelligence Index, compared with 44 for DeepSeek V4-Pro. The gap is meaningful on the most demanding reasoning and agentic tasks, but it comes at a steep price: roughly $3.25 per task versus just $0.05 for DeepSeek.
For many everyday use cases, the performance difference may not justify the cost. Think of it as a high-end supercar versus a reliable family wagon. The supercar is undeniably more capable, but for most trips the cheaper option gets you to the same destination at a fraction of the cost.
