China still looks weak

Consumer spending is soft, property remains in a slump, and business investment is weak. Dale Nicholls says the domestic picture is muted overall.

“things are relatively muted”

Some firms still grow

Nicholls points to high-end mall operators and restaurant chains that are still posting good numbers. The right business models are taking share in a weak market.

“pockets of strength in certain areas”

AI is the bright spot

Companies tied to AI are seeing strong demand. Nicholls describes a tech boom in the parts of China’s market linked to AI spending.

“Business is strong for the companies that are involved with that”

Capex fears may be overdone

Investors have punished Alibaba, Tencent, and other tech groups for raising AI spending. Nicholls argues the better question is whether past spending has paid off.

“this feels to me a little bit overdone”

Big tech still has value

Nicholls says some large Chinese tech names look cheap after sell-offs. Cloud growth is picking up, which makes the sum of their parts more attractive.

“you’re actually seeing accelerating growth now”

China is closing in

US firms still lead global AI, but Chinese models are becoming serious rivals. Nicholls says the market is not giving enough credit to China’s LLM strength.

“some of the most competitive LLMs out there”

DeepSeek shook markets

DeepSeek’s R1 model rattled Western investors in January 2025 by showing China could challenge frontier AI. Kimi K3 later sparked a similar scare in July.

Kimi points to innovation

Nicholls says Kimi K3 performs near global frontier models despite a different scale and pricing setup. For him, it shows China’s AI push is real.

“another indication of the innovation that’s happening on the ground”