TLDR: An Australian pension fund has issued a warning that China’s rapid advancements in artificial intelligence (AI) could potentially destabilize the ongoing US market rally. This comes as Chinese tech giants demonstrate increasing self-sufficiency in AI development, challenging previous assumptions about the effectiveness of US sanctions.
An Australian pension fund has raised concerns that China’s accelerating progress in artificial intelligence (AI) could pose a significant threat to the sustained US market rally. This warning highlights a growing sentiment among some fund managers that China’s tech sector is becoming increasingly resilient to American efforts to curb its technological growth.
According to Nick Evans, co-manager of the Polar Capital Global Technology fund, the effectiveness of the Trump administration’s attempts to isolate China technologically has been undermined by the rapid strides made by Chinese firms. Evans noted that after the US election in November 2024, his fund significantly reduced its China exposure, anticipating that former President Trump would intensify chip and equipment bans. However, these delays have allowed China to advance further than expected in AI development.
A pivotal moment in this realization came in January 2025, when DeepSeek, a low-cost Chinese AI chatbot, surpassed ChatGPT in downloads. This demonstrated China’s capability to train large language models efficiently with fewer resources and less powerful chips. While DeepSeek’s rapid growth was temporarily halted by a cyber-attack, Tina Tian, manager of Fidelity China Innovation, emphasized that it has spurred more open-source focused Chinese companies to innovate for self-sufficiency, reducing reliance on Western suppliers for critical AI technologies.
Chinese tech giants are now mirroring the growth trajectory seen in the US AI landscape. Alibaba, for instance, has dramatically increased its capital expenditure estimates for AI, planning to spend over $53 billion on a global AI infrastructure plan in the coming years. This investment includes establishing data centers across the Middle East, Europe, Southeast Asia, and Latin America. Despite being blocked from purchasing Nvidia’s cutting-edge chips due to US restrictions, Chinese companies are turning to homegrown alternatives. Huawei, for example, plans to increase its production of advanced AI chips to 1.6 million in 2026, up from one million this year. Research by Bernstein projects that China’s locally developed AI chips could capture a 55% share of the Chinese market by 2027, a substantial increase from 17% in 2023.
Evans pointed out that China possesses an ‘unlimited supply of energy and power,’ enabling it to compensate for less advanced individual chips by deploying more of them. Furthermore, Alibaba has secured a deal with Chinese e-commerce giant Unicom to deploy its own AI accelerators. In a strategic move, Alibaba is also integrating Nvidia’s physical AI tools into its cloud platform, providing Nvidia direct access to Chinese developers while allowing Alibaba to remain competitive with domestic rivals like Huawei Cloud and Baidu AI Cloud.
These developments suggest that the US’s ability to halt China’s AI sector growth is diminishing. Consequently, Polar Capital Global Technology has increased its China exposure from under 1.5% to approximately 7%, investing in companies such as Tencent, Alibaba, and Xiaomi.
Separately, Saudi Arabia’s AI startup Humain, led by Tareq Amin, aims to become the third-largest global provider of computing capacity, behind the US and China. Humain has provided guarantees to US officials, including a commitment not to purchase equipment from Huawei, to secure access to advanced US AI chips from companies like Nvidia and Advanced Micro Devices. Humain plans to deploy 18,000 chips in 2026, with ambitions to reach 400,000 AI chips by 2030.
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Overall, the AI race is no longer solely a US narrative, with China’s tech giants emerging as formidable contenders. While the US remains a dominant market for AI investment, the evolving landscape suggests a more diversified field of winners in the global AI competition.
