The emergence of DeepSeek in late January has shaken the once-robust Magnificent Seven, a cohort of major U.S. tech powerhouses, obliterating over $1 trillion in market value. Nvidia was particularly hit hard, enduring an unprecedented one-day loss of nearly $600 billion.
As momentum falters in the U.S., China’s tech giants have seized the spotlight, with Alibaba Group and Tencent Holdings at the forefront. Since the U.S. tech market upheaval on January 27, Alibaba (HK: 9988) has skyrocketed 65%, while Tencent (HK: 0700) has climbed 36.5%, marking a significant victory for Chinese mega-caps.
Amid a $439 billion surge in Chinese tech mega-caps this year, their once-dominant U.S. counterparts have been left trailing, with many investors anticipating further outperformance by the Chinese firms.
Based on the Solactive Magnificent Seven Equal Weighted GTR Index, a benchmark that tracks the total return performance of the Magnificent Seven, the group altogether has dropped 13% since January 24, 2025.
This unexpected shift in market dynamics caught many on Wall Street by surprise. Earlier in 2025, the Nasdaq had achieved another record high while Chinese equities reeled from stringent regulatory measures and lackluster consumer recovery. However, this perception was dramatically altered when DeepSeek, a Chinese AI startup, challenged the notion that China lagged behind in AI innovation compared to the U.S.
On January 27th, DeepSeek’s emergence triggered significant sell-offs in U.S. tech, particularly within the AI sector, as investors feared a potential decrease in demand for expensive high-tech chips and cheaper AI development. This development saw the Nasdaq Composite fall by 3.1%, with Nvidia’s shares suffering a historic one-day loss in market capitalization.
Chinese tech stocks have experienced a strong rally since, winning over even staunch skeptics. This momentum was bolstered further by Beijing’s enhanced support measures for tech firms and a range of new AI tools from companies like Alibaba. Meanwhile, the extended rally in U.S. big tech stocks, led by Nvidia Corp., has hit obstacles, as investors grow wary of their lofty valuations and increasingly demand substantial earnings.
This week, China has announced plans to ramp up support for the development and deployment of artificial intelligence (AI) models and venture capital investments to fuel technological advancements and increase self-reliance. These initiatives are detailed in a government document prepared for the annual session of the National People’s Congress (NPC), the country’s legislative body.
China aims to cultivate “industries of the future,” such as biomanufacturing, quantum technology, embodied AI, and 6G technology. The report highlights plans to explore innovative frameworks for national laboratories and to empower young scientists and engineers with “important responsibilities” and robust support.
Further commitments include enhancing applications of large-scale AI models and advancing next-generation intelligent and smart manufacturing terminals. This marks the first explicit mention of AI models in the annual work report, coinciding with the recent international attention surrounding Chinese AI startup DeepSeek.
