US-China trade tensions escalate, but analysts predict that a small number of Chinese companies will be able to beat Beijing’s efforts to double generative artificial intelligence. “We expect the demand for AI to be strong as Deepseek’s cost improvements drive application development, which means companies believe AI development is important for growth and competition,” Bernstein analyst Boris Van and his team said in a note on April 7th. “We expect the development of the AI+CHIP ecosystem to be a key driver from the government to offset the impact of tariffs,” analysts said. Chinese companies have been rushing for the past few months to test Deepseek’s generative artificial intelligence capabilities. Some companies report cost cuts, and strategists hope that it will help companies’ revenues turn around in the end. Bernstein’s two out-of-performance theatres are Kingsoft Office, listed in Shanghai, the operator of Word-Processing App WPS, and Kingdee, listed in Hong Kong, which sells software services for business management. Investment analysts noted that during the escalation of US-China tensions during US President Donald Trump’s first term, China’s spending on local information technology increased in part to offset the impact of tariffs on trade as regionalization policies were announced. “We will be able to see a scenario where AI is a new and important technology that China uses to sustain further growth,” a Bernstein analyst said it could promote locally created systems, such as the Huawei ecosystem. The AI integrated version of WPS reached 19.68 million active users per month in mainland China last year, Kingsoft Office said in its annual report last month. The company has released a WPS version of Huawei’s Harmonyos Next operating system, which it claims to be independent from Android. Kingdee said in its annual report last month that it plans to “a complete pivot for enterprise management AI companies” this year. In its application last week, the company said it had acquired new customers in the first quarter, including automakers Geely, Spirits Company Kweichow Moutai and 01.AI, an AI startup founded by former Google China Head Kai-Fu Lee. The Economist Intelligence Unit estimates that China’s AI-related spending will increase by up to 25% per year this year and next year, with economic output of up to 0.13% of its nominal gross domestic product in 2024. However, US-China tariff tensions have led Goldman Sachs and City to lower forecasts for China’s economic growth this year, given the rising tensions between the US and Beijing. China on Friday rebutted that tariffs in yet another round of the US increased along with its own obligations. Both countries expanded their duties to triple-digit rates with each other’s products. China said it plans to “ignor” the subsequent increase in US tariffs, but has pledged to retaliate about other US actions as needed. “The full swing tariff war can hurt the macroeconomics and the ripple effects can spread across most economic sectors,” Bing Duan, Nomura’s Chinese technology research analyst, and his team, said in a note on April 7th. “On the other hand, we believe that domestic AI demand remains buoyant, following China’s ambitions for Deepseek’s innovation and AI leadership.” “We like it.” [internet data center]/Cloud companies are at their fullest because demand is barely affected by “mutual” tariffs,” Nomura said. Purchase dramas in the category include state-owned China Mobile and two US listed stocks. GDS and VNET. VNET forecasts net revenue from internet data centres will rise 28.3% last year, with overall utilization of wholesale data centres in the Beijing area reaching 85% in 2025. Analysts said it comes primarily from China. “To mitigate the impact of tariffs on China’s export growth, the government may continue to encourage investments to drive domestic growth, particularly in digital infrastructure, including cloud computing and IDC infrastructure. Nomura’s second most favorable category is AI software and applications. We contributed to this report.
