Asia Roundtable: No escape from the tech trap

China’s DeepSeek—an emerging AI contender—has disrupted this narrative of US dominance in the AI sphere. As the AI arms race intensifies, the question is no longer whether China can compete, but rather how significantly it will challenge the long-standing dominance of US tech giants.

Ian Rees at Premier Miton Investors says history has shown that the entrepreneurial nature of capital markets always surfaces, no matter the obstacles, and that China now offers stiff competition.

What stands out for Rees is how China, although facing technology tariffs and restrictions on imports from the US, has still managed to develop and compete in AI.

“Despite China having been on the thick end of technology tariffs and an inability to import from the US, they’ve still been able to develop and compete with the US when it comes to AI,” he said.

This underscores two important takeaways. First, it challenges the assumption that US tech dominance is unshakable —both in terms of market power and valuations. Second, it proves that the US does not have a monopoly on innovation.

“That should be a cause for people to reevaluate what they can expect from China and Asia more generally,” he adds.

In January, Donald Trump proposed a shift in US trade policy, advocating for tariffs of 25%, 50%, or even 100% on imported goods instead of direct subsidies. His goal seems to be to push companies to relocate production back to the US, particularly in key sectors like semiconductors, pharmaceuticals, and advanced technology. Taiwan, home to TSMC —one of the world’s largest semiconductor manufacturers— is already reacting to the pressure. Taiwan’s president Lai Ching-te pledged to increase investment and procurement from the US in an effort to balance trade and mitigate the risks of Trump’s proposed tariffs. The US trade deficit with Taiwan hit $73.9 billion last year, largely due to soaring demand for AI chips, making the sector a likely target for new trade measures.

“Going forward, it will be a tech race between the US and China,” said Lena Tsymbaluk, fund analyst at Morningstar. “China is shifting, and the government is ready to take measures we haven’t seen before. They might take more steps to offset tariffs, so the outlook doesn’t seem all negative,” she said.

The £3.4 billion Church of England Pensions Board is raising concerns over supply chain risks linked to ongoing conflict in the Democratic Republic of Congo. Following the capture of Goma by M23 rebels, the Board is rallying investor support for the Goma Call for Peace, an initiative led by Anglican Bishop Rt Revd Martin Gordon, urging resolution efforts.

Congo plays a vital role in the global supply of cobalt, lithium, and tantalum—minerals essential for AI chips, semiconductors, and battery technology. As the US (OpenAI) and China (DeepSeek) drive innovation in artificial intelligence, potential disruptions to mineral supply chains could have widespread economic and technological impacts.

Rees also pointed out that China’s economy is adapting to structural shifts, including a renewed focus on technological self-sufficiency and supply chain resilience. “The Chinese government has been strategically reducing its dependence on US technology, focusing instead on developing homegrown capabilities in AI, semiconductors, and industrial automation. This transition is crucial for long-term economic stability.”

AI and tech drive Asia’s next growth phase

The AI revolution is becoming a defining theme in Asian and emerging markets, with China positioning itself as a strong competitor, according to the panellists. Tsymbaluk commented: “Internet and technology companies will once again take the lead. Even chipmakers and hardware firms stand to benefit from the AI-driven trend. With Trump focused on economic growth, companies like Taiwan’s chip manufacturers and hardware firms will likely gain from the expansion of US businesses.”

Taiwanese chipmaker TSMC, a major supplier to Apple and Nvidia, forecast last year an annual revenue growth of 10% in the global semiconductor industry, excluding memory chips.

Francis Chua, multi-asset fund manager at Legal & General Investment Management (LGIM), highlighted emerging markets and China’s growing AI capabilities. “Over the past 30 years, Asia has dominated global semiconductor manufacturing, driven by strategic government support. TSMC, founded with state-backed incentives, and Samsung Electronics, benefiting from South Korea’s chaebol policies, became industry leaders. China is now working to replicate this model and establish its competitive semiconductor ecosystem.”

The outcomes of tariffs could either work in favour or against the incumbents within AI. While that is something LGIM appreciates, it also recognises there could be bumps along the way. Highlighting the role of “reposting to other areas of the value chain”, Chua highlighted how countries like Vietnam are benefiting from an acceleration in modernisation, reflecting growth patterns seen previously in other Asian tech powerhouses.

Rees appreciated the “divergence” in Asian tech investments. Not long ago, China dominated the discussion with Asia, but now India, Korea and Taiwan are also making their presence felt in the chip industry.

According to the panellists, this creates a wider opportunity set for investors to consider. For instance, Nick Oakden, business development director, Caceis Investor Services, mentioned how China recently unleashed the first flying car with distributed electric-driving, suggesting that innovation is widening its horizons faster than ever, and it would be interesting to watch the space for futuristic tech innovations.

The Magnificent Seven and concentration concerns

Developed markets exposure today is weighted towards the Magnificent Seven stocks— seven of the world’s biggest and most influential tech companies: Apple, Microsoft, Amazon, Alphabet (Google’s parent company), Meta, Nvidia, and Tesla. The global market today feels eerily like the days before the dot-com crash, with an overwhelming concentration of capital in the tech sector. Amid this backdrop, investors might want to spread their bets and reduce risk by looking beyond the usual tech giants, the panellists suggested.

The debate over tech stock concentration is not limited to the US, however. While much of the global AI discussion focuses on the Magnificent Seven tech stocks in developed markets, similar risks exist in Asia. Tsymbaluk pointed out that TSMC alone makes up 12.5 % of the MSCI Asia ex-Japan index (as of January 31, 2025), followed by Tencent, Alibaba and Samsung Electronics.

The Mag Seven stocks drove 34% of the S&P index’s returns over the last five years. In Asia, only TSMC and Tencent accounted for over 50% of index returns during the same period.

According to Tsymbaluk, this mirrors the high concentration of tech seen in US markets, raising concerns about overexposure, diversification and long-term market stability.

“If investors are seeking to avoid concentration risk in US tech, they may find a similar challenge in Asia,” she added.

The problem is that while the US market performed well overall, Asia’s market did not. This makes tech concentration even more concerning.

However, with competition between the US and China in AI and technology set to intensify, DeepSeek will boost Chinese companies’ capabilities, Tsymbaluk predicted. “It’s going to help Chinese companies,” she said, pointing to Alibaba and Tencent as key beneficiaries.

Chua added that “there’s no real template for mapping AI’s exponential growth – we are only scratching the surface”.

“Investors may worry about tech stock concentration, but history has shown that transformative technology trends, such as AI, often justify such dominance.” He added that, in the case of AI investment, diversification across regions and industries could be a way to mitigate concentration risk while still capturing the upside potential.

The future of AI and investment opportunities in Asia

AI investment in Asia is set to grow, with key players like TSMC playing an integral role in the semiconductor supply chain. Chua highlighted TSMC’s relationship with Nvidia: “TSMC has a vested interest in Nvidia’s success because of its semiconductor sales. This underscores the symbiotic relationship between North American AI firms and Asian hardware manufacturers.”

Chua viewed AI as a “growing pie” with enough opportunity for multiple players to benefit, though he emphasised the need for mindful valuations and diversification.

DeepSeek has made significant progress despite US sanctions. Founded by Liang Wenfeng, a former hedge fund manager, the firm recently shook the US stock market. Global investors sold off tech stocks on January 24, fearing that the rise of a low-cost Chinese artificial intelligence model could challenge the dominance of AI giants like Nvidia. The sell-off wiped out $593 billion from Nvidia’s market value, marking the largest single-day loss for any company on Wall Street, according to Reuters).

As LGIM’s Chua pointed out, Wenfeng transitioned from finance to tech to help bridge the AI gap between China and the US.

Rees, of Premier Miton Investors, found the entry of DeepSeek in the AI market particularly intriguing: “People assumed China wouldn’t be able to compete in AI due to sanctions. DeepSeek’s progress is a testament to China’s innovation and resilience.” Rees also highlighted India’s growing dominance in the tech sector over the last 20 years, demonstrating that new players can emerge. Vietnam is another country following a similar trajectory for tech innovation, and it’s worth paying attention to how these markets develop, he said.

Despite the tariff challenges, Morningstar’s Tsymbaluk highlighted AI-fuelled opportunities within China’s domestic economy. “There has been a shift towards domestic consumer household goods and internet services. AI and digitalisation are becoming crucial, especially with the entry of DeepSeek-like technologies to stay competitive without incurring massive costs.”

The panellists also reflected that a new wave of AI could be a gamechanger for Asian companies that are challenged to improve productivity and efficiency.

Participants