China is seeing a renewed surge in technology-led optimism as it heads into 2026, with fresh advances in artificial intelligence and other high-tech sectors driving a strong rally in tech stocks, even as the wider economy continues to face challenges.
Nearly a year after DeepSeek’s AI breakthrough sent shockwaves through global markets, China is heading into 2026 with a new surge of technological advances that is fuelling a strong stock rally, even as the broader economy remains under strain.
Fresh progress across sectors ranging from commercial space launches to robotics and flying cars has lifted investor sentiment. Chinese technology shares have started the year sharply higher, with an onshore Nasdaq-style tech index up nearly 13 percent so far this month, while an index tracking Hong Kong–listed Chinese tech firms has risen close to 6 percent. Both have outperformed the Nasdaq 100.
Optimism around home-grown technology has been the main driver of China’s equity rally since April last year, despite persistent headwinds such as a prolonged property downturn and weak consumer demand. Momentum could strengthen further as DeepSeek prepares to roll out a new AI model and Beijing readies a new five-year economic plan that puts technological self-reliance at its core.
“The stock market is telling us that what China is doing in the technology sector is going to be very exciting going forward,” said Mark Mobius, managing director of Mobius Emerging Opportunities Fund. He added that China’s clear objective is to overtake the US in areas such as advanced chips and artificial intelligence, drawing capital towards the sector.
Since DeepSeek stunned markets on January 27 last year with low-cost AI models that matched global rivals in performance, other Chinese firms have stepped up efforts to build their own systems. Use of generative AI has expanded rapidly among major internet companies, including Alibaba Group Holding and Tencent Holdings.
Beyond AI, Chinese robots have drawn attention by competing in marathons, boxing matches and cultural performances. In manufacturing, large language models are being integrated into advanced products such as flying taxis and high-precision machine tools. These developments are reshaping investor perceptions of China, from a low-cost manufacturing hub to a credible challenger to US technological leadership at a time when global capital is searching for the next growth engine.
According to Jefferies Financial Group, a basket of 33 Chinese AI stocks gained around $732 billion in combined market value over the past year. The brokerage said there could be further upside, noting that China’s AI market capitalisation is still only about 6.5 percent of that of the United States.
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