Of shuli ren*

China is in a period of “explosion” of stock markets. The CSI 300 has rose 9% so far this month, while the Chinextx, with a large participation of technology companies, has launched 18%, leaving the S&P 500 far behind.

As the “beast” begins to wake up, there are concerns that we will see a 2015 repetition – a euphoric rise in the first half of the year, followed by an equally spectacular fall that threw CSI 300 by 47% due to concerns that the profits were not viable.

The current economic environment is definitely similar. For almost three years there has been a producer deflation in the longest period of the last decade. The government is discussing the possibility of ending the prices war that has undermined corporate profits, reminiscent of the so -called reform of the bid introduced in 2015. Transactions on credit, a measure of risk -taking, are at its highest level.

How is it possible for the stock market to be so good while the economy is on deflation? It seems that China once again enters a bubble powered by liquidity.

Before we come to this conclusion, however, it is worth asking what companies are the markets on the market and whether their profits justify the “love” of investors.

Unlike a decade ago, when central bank interest rates have caused the craze of shares, artificial intelligence supports the latest rise, while creating new mega caps, that is, the companies of very large stock market capitalization.

The new narrative of China that buys in China is gaining ground quickly. Last week, Deepseek released an upgrade of the V3 model, changing the settings to host the next generation of domestic chips. Meanwhile, Nvidia is alleged to have stopped production of the H20 AI chip, which is specially designed for the Chinese market, as Beijing has asked technology companies to stop buying them due to concerns for national security.

In other words, China not only wants its own models of artificial intelligence, but also to supply them with its own material. Located companies that have passed Deepseek compatibility tests, including Cambricon Technologies and Hygon Information Technology -based chips, have risen rapidly in their value.

In the meantime, as the period of financial results evolve, the results are not bad at all. Of the 65 CSI 300 technology companies, 28 have published the results of the second quarter, with an average increase in sales and profits by 11.4% and 15.5% respectively, the best results in one year. Hygon’s revenue, which has risen 51% this month, increased by 41% compared to last year.

At the beginning of the year, the arrival of Deepseek’s amazingly good Language model was thrilled by the Hong Kong Stock Exchange, where they are listed by China’s largest technology companies. Companies like Tencent and Alibaba promoted their own models, taking advantage of Deepseek’s success.

Now, we are in the next phase of the transformation of Chinese shares from artificial intelligence. The focus is the infrastructure companies. This time, the stock markets of mainland China, where they are often imported into the Stock Exchange, are the biggest winners. They are just trying to cover the difference with Hong Kong, a phenomenon not observed in 2015.

At first glance, some of the valuation indicators may seem discouraging. Cambricon, for example, the market for the market, negotiates 66 times future sales, well over 19 times Nvidia, which is also accurate. However, we are dealing with a revolutionary technology that is at an early stage of evolution. It’s too early to say whether a share is overpriced or not. It would be better to take advantage of the more general issue. Goldman Sachs, always looking back in the future, increased Cambricon’s price target by 50%, valued the company 9 times the 2030 sales.

Most of us now agree that artificial intelligence is revolutionary. Therefore, investors must avoid linear thinking and not make many parallels with the past. Amidst all this frenzy, the Chinese market worth 12 trillion. Dollars is just trying to find her own version of Nvidia.

*Shuli Ren is a column of Bloomberg Opinion column and covers Asian markets