Core Viewpoint - Chinese tech shares are experiencing significant growth driven by advancements in various sectors, including AI, robotics, and flying cars, with notable performance in January 2026 [1][18]. Group 1: Market Performance - An onshore Nasdaq-like tech gauge has increased by almost 13% this month, while Hong Kong-listed Chinese tech firms have risen nearly 6%, both outperforming the Nasdaq 100 [1][18]. - The combined market value of 33 Chinese AI stocks tracked by Jefferies Financial Group has expanded by approximately $732 billion over the past year, with China's AI market capitalization representing only 6.5% of the US's [9][18]. Group 2: Technological Advancements - Enthusiasm for homegrown technologies has been the primary driver of China's equities bull run since April, despite challenges in the housing market and weak consumption [2][18]. - The rollout of a new AI model by DeepSeek and the unveiling of a five-year economic blueprint focusing on technological self-reliance are expected to further support market momentum [2][15][18]. - Chinese firms are accelerating efforts to develop AI models following DeepSeek's success, with generative AI adoption surging among major internet companies like Alibaba and Tencent [5][6][18]. Group 3: Investment Sentiment - Investors are optimistic about the technology sector's prospects due to China's low-cost base and strong state support, with expectations that the release of DeepSeek's R2 model could disrupt the sector again [14][18]. - Recent listing debuts of Chinese AI-related companies have shown significant gains, encouraging more firms to enter public markets [10][18]. - Analysts predict that the next major breakthrough in AI will occur at the application layer, with China well-positioned to lead this evolution due to its diverse user cases [11][18]. Group 4: Valuation Concerns - The rapid rally in tech stocks has raised concerns about stretched valuations, with some companies trading at high multiples, such as Cambricon Technologies at about 120 times forward earnings [13][18]. - Beijing's decision to tighten margin financing indicates growing unease with speculative excess in the technology sector [13][18].

Core Insights - Nvidia's earnings report is highly anticipated as it reflects the state of the AI industry, especially following the emergence of DeepSeek, which has introduced competitive AI models requiring less powerful hardware [1][2] - Nvidia experienced a significant market reaction, losing $600 billion in market capitalization in one day due to concerns over DeepSeek's impact on its business [2] - Despite initial losses, Nvidia's stock stabilized, and some cloud firms reported increased demand for Nvidia chips as a result of DeepSeek's models, although Nvidia shares are down over 8% year-to-date compared to the S&P 500's 1.48% increase [3] Company Performance - Nvidia CEO Jensen Huang believes the market overreacted to the DeepSeek situation and aims to address investor concerns regarding AI spending in the upcoming earnings report [4] - The company has consistently met or exceeded expectations, but its revenue guidance for the third quarter fell short of the highest predictions, leading to stock price declines [4] - Analysts are optimistic about Nvidia's upcoming earnings, with expectations that the company will beat estimates and possibly raise first-quarter revenue guidance [5]