J.P. Morgan Asset Management: China's technology sector will see "more DeepSeek moments"

J.P. Morgan Asset Management anticipates that Chinese technology stocks will continue to benefit from technological breakthroughs. As China intensifies its efforts to cultivate more innovative companies like DeepSeek, investors are expected to witness more milestone achievements. The firm believes that the growth of AI spending and policy support will be key catalysts driving the sector's rise.

According to the latest report by Bloomberg, Raisah Rasid, Global Market Strategist of the company, said at a press event in Singapore that there are still plenty of opportunities in the Chinese tech sector, and investors will see more advancements in robotics technology as well as more DeepSeek moments. Since the start of the year, the index tracking mainland China tech stocks has risen by about 12%, outperforming comparable indices in Hong Kong and the US, with investors continuing to flock to the sector.

From chips to humanoid robots to commercial rockets, daily breakthroughs in China's tech sector are driving market enthusiasm, while numerous planned IPOs add further momentum. Rasid pointed out that last year, China's top cloud service providers spent around $50 billion in capital expenditure, compared to $350 billion by their US counterparts, indicating significant room for growth in capital spending by Chinese firms.

Looking to the future, J.P. Morgan Asset Management believes Chinese tech companies will not only benefit from the acceleration of government-driven industrial development, but may also gain from a potential relaxation of US chip export restrictions. On the demand side, China is integrating AI into a wide range of sectors, including food and hospitality, creating more use cases for tech companies.

Capital Expenditure Gap Implies Growth Potential

There is a significant capital expenditure gap between US and Chinese tech companies in the field of artificial intelligence. Rasid noted that last year, China's leading cloud service providers spent about $50 billion, only about one-seventh of the $350 billion spent by their US counterparts. This gap leaves ample room for increased investment by Chinese firms in the future, and growth in capital expenditure will in turn drive technological advancement.

On the demand side, China is integrating AI technology into several traditional industries such as food and hotels. In addition, accelerated government-driven industrial development and the prospect of a relaxation in US chip export controls will provide additional benefits for Chinese tech companies. These factors combined underpin the strong fundamentals supporting the sector’s continued rise.

Policy and Innovation as Dual Drivers

J.P. Morgan Asset Management stresses that a more favorable policy environment will be one of the key catalysts for boosting Chinese tech stocks. China is ramping up efforts to create more innovative firms like DeepSeek, with technological breakthroughs in fields ranging from chips to humanoid robots to commercial rockets emerging rapidly.

The market performance year-to-date already confirms this trend. The index tracking mainland Chinese tech stocks is up about 12%, outperforming comparable indices in Hong Kong and the US. Numerous planned IPOs are injecting new energy into the market. Rasid said investors will witness more advancements and breakthrough moments in robotics technology, as innovation momentum in the Chinese tech sector continues to accelerate.

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