AI Stocks Still Face a China Risk

“This time last year, several highflying stocks plunged. What knocked trillions off of the value of the U.S. market was news that a Chinese AI company, DeepSeek, had nearly matched U.S. competitors that were spending fortunes on chips and electricity.

 

Nvidia and its Taiwanese supplier TSMC were casualties, down by 17% and 13%, respectively. Hardest hit were power suppliers to data centers. Turbine maker GE Vernova and nuclear-plant owners Vistra and Constellation Energy each shed more than a fifth of their value.

 

As Heard on the Street columnist Dan Gallagher explained at the time, the reaction was excessive and DeepSeek's claims seemed exaggerated. It was a great call: Nearly all of the affected stocks rebounded.

 

Will that momentum continue? Even if you just own index funds and not AI stocks directly, it's a crucial question. JPMorgan Asset Management says in a report that 42 AI-related companies are responsible for between 65% and 75% of the S&P 500's gains, earnings and capital spending since ChatGPT was launched in November 2022.

 

China could play the spoiler again because there's more than one way to skin an AI cat. It can't openly get the cutting-edge chips that U.S. companies have, but it's working on homegrown alternatives and other shortcuts. AI is a national priority that doesn't depend on making quarterly numbers.

 

As the JPMorgan report points out, and as investors understood on DeepSeek day, a key ingredient in all this is electricity. Tech giants in the U.S. are angering politicians and consumers by sending utility bills higher. AI developers are now being asked to shoulder more of the cost.

 

Despite a nuclear and fossil-fuel friendly White House, generation capacity and transmission lines take time to build. Since 2019, China has added an astounding 2,500 terawatt hours of capacity -- more than 10 times what the U.S. has over the same period.

 

If Chinese AI models become good enough to attract more corporate and individual spending then that will spell trouble for companies like OpenAI. The same goes for others connected to OpenAI through complex financial webs. In the longer run, it could affect a swath of the stock market -- and even hurt the U.S. chip makers that still have a technological edge.” [1]

 

1. AI Stocks Still Face a China Risk. Jakab, Spencer.  Wall Street Journal, Eastern edition; New York, N.Y.. 28 Jan 2026: B12.