Chinese tech stocks ride DeepSeek wave to bull market

Today’s agenda: US industry’s tariff chaos; EU weighs gas price cap; visual story on US bitcoin reserve; “Trump trades” backfire; and HTSI’s Valentine’s Day gift ideas

Good morning. We start today with a look at Chinese technology stocks, which have outpaced the Nasdaq 100 and “Magnificent Seven” US tech giants to enter a bull market in the past month.

What’s behind the boom? The 25 per cent rise in the Hang Seng Tech index, which tracks the 30 largest tech groups listed in Hong Kong, reflects renewed foreign investor interest in China after DeepSeek’s artificial intelligence breakthrough. The start-up stunned Silicon Valley last month when it released a large language model (LLM) that it said was built on a bootstrapped budget. Cloud computing and tech hardware companies that stand to benefit from AI innovations have led the recent rally.

Why it matters: The rally is a boon to China’s markets, which have been buffeted by concerns over US President Donald Trump’s tariffs, a mainland property slump and deflationary pressures in the economy. It also represents a global reappraisal of Chinese tech companies. Analysts said investors were boosted by the belief that Chinese development of LLMs was advancing and consumer-facing companies would rapidly adopt them. “The US is strong in terms of zero-to-one innovation, but China is stronger in terms of one-to-100 innovation, in terms of widening access and adoption of tech,” said one analyst. Here’s more on the boom in Chinese tech stocks.

• Schmidt on DeepSeek: The former Google chief has warned that western countries need to focus on building open-source AI models or risk losing out to China.

• 🎧 Is AI overvalued? In the latest episode of our Tech Tonic podcast, AI editor Madhumita Murgia asks whether the cutting-edge technology’s benefits justify the investment.

• Chinese tech: CATL, the world’s largest electric-vehicle battery maker, has applied for a secondary listing in Hong Kong, in what could be the city’s largest stock offering in years. 

Scroll down for today’s featured chart on how “Trump trades” have backfired recently. And here’s what else we’re keeping tabs on today:

• Economic data: The US and EU release inflation data, while the Opec cartel releases its monthly oil market report.

• UK banks: Lenders including HSBC, Barclays and NatWest are set to urge chancellor Rachel Reeves to ease rules on hiring top foreign talent.

• Results: Heineken, Kraft Heinz, Michelin, Reddit and SoftBank are among those reporting. See our Week Ahead newsletter for the full list.

Five more top stories

1. Donald Trump’s threat to impose 25 per cent tariffs on steel and aluminium is rippling across US industry, with companies ranging from manufacturers to oil and gas drillers facing increasing costs. Many executives are rushing to find ways to mitigate the political tumult and fallout from rising prices.

2. Exclusive: Brussels is weighing new powers to temporarily cap EU gas prices, which have recently hit record levels compared with the US. People with knowledge of the talks said the European Commission was considering the move as part of discussions about a “clean industrial deal” policy document to be presented next month.

3. South Africa’s foreign minister has vowed to push ahead with its genocide case against Israel at the International Court of Justice despite an executive order signed by Trump punishing the country for its “aggressive” position towards the US ally. Ronald Lamola told the Financial Times there was “no chance” his country would withdraw the ICJ case.

4. Exclusive: Investment in European start-ups working on defence and related technologies jumped 24 per cent to $5.2bn last year, outpacing growth in venture capital for AI in the continent over the past two years. More details from the Nato Innovation Fund’s latest data.

5. Russia has released an American teacher from detention in a move the White House described as a show of “good faith” that would help talks to end the war in Ukraine. Trump’s special envoy Steve Witkoff flew to Moscow yesterday to negotiate the deal and secure the return of Marc Fogel, who had been detained in Russia since 2021.

Visual story

Trump has vowed to make America the world’s “crypto capital”, words that have helped supercharge bitcoin’s price to six-figure highs. Enthusiasts are particularly excited by talk of a national bitcoin stockpile. But how such a reserve would work, and what it would mean for the cryptocurrency, is unclear. And would taxpayers be left holding the bag if — or when — prices fall?

We’re also reading . . . 

• Climate disconnect: New attempts to prolong the fossil fuel era have come at precisely the wrong time, writes Pilita Clark.

• Global development: Amid the Trump administration’s onslaught on USAID, Martin Wolf presents the moral argument for persisting with foreign aid.

• Vanguard: Today’s Big Read explores the new challenges facing the passive investing powerhouse as it pushes into wealth management and cash accounts.

• Victoria’s Secret: Can the lingerie brand that built a multibillion-dollar empire on extravagant shows and a provocative image win over Gen Z?

Chart of the day

“Trump trade” bets on a stronger dollar and higher bond yields have backfired. The weakening of the US currency and a rally in Treasuries have confounded widespread investor expectations that Trump’s economic agenda would keep inflation and interest rates high.

Take a break from the news . . . 

With Valentine’s Day just around the corner, HTSI has pulled together 17 gift ideas that say classic, not kitsch.