# China's AI boom is testing investor nerves

> Dale Nicholls sees a weak Chinese economy, but says AI and select consumer firms still offer value.
- Title: China's AI boom is testing investor nerves · MoneyWeek
- Summary: Dale Nicholls sees a weak Chinese economy, but says AI and select consumer firms still offer value. China’s economy is soft, but investors may be missing the…
- Keywords: china, dale nicholls, fidelity china special situations, alibaba, tencent, deepseek, kimi k3, large language models, capital expenditure, cloud, china stock markets, China's
- Source: MoneyWeek — https://moneyweek.com/investments/china-stock-markets/dale-nicholls-moneyweek-talks
- Published: 2026-09-16T04:00:00+00:00
- Read time: 1 min
- Topics: china, ai, dale nicholls, fidelity china special situations, alibaba, tencent, deepseek, kimi k3, large language models, capital expenditure, cloud, china stock markets
## 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
## Key takeaway

China’s economy is soft, but investors may be missing the value in AI firms and other companies still gaining share.