Asian shares advance amid Chinese AI optimism fuelled by DeepSeek

China’s tech-powered rally is gaining momentum as DeepSeek’s breakthrough in artificial intelligence drove a $1.3 trillion rally in the country’s shares

Asian stocks gained as AI optimism boosted tech shares in Hong Kong and China, while other investors remained cautious due to tensions between the US and European Union over tariffs and the war in Ukraine.

Tencent Holdings Ltd. jumped as much as 7.8% in Hong Kong, extending a winning run that’s gotten a boost from DeepSeek’s debut. A gauge of Asian shares rose to its highest level since November, helped by technology companies. The dollar was little changed, while Treasury futures edged lower with cash trading closed globally due to Presidents’ Day in the US.

China’s tech-powered rally is gaining momentum as DeepSeek’s breakthrough in artificial intelligence drove a $1.3 trillion rally in the country’s shares. A potential meeting this week between President Xi Jinping and e-commerce icon Jack Ma may fuel optimism further. That contrasts with increasing discord between the US and Europe, which prompted a drop in German and French bond futures.

“The growth momentum in China could see some new lease on life” given what’s happening in AI,” said Tai Hui, Asia-Pacific chief Market strategist at JPMorgan Asset Management. “I think the China-AI story is continuing to develop.”

Goldman Sachs Group Inc. strategists raised their MSCI China index target on optimism over the country’s technological advancements. Meanwhile, investor Michael Burry had rolled back on some of his investments in Chinese tech stocks just before DeepSeek’s breakthrough.

Markets remained volatile during Asian trade, with the MSCI Asia Pacific gauge trimming some gains from its earlier highs.

US President Donald Trump’s tariff plans sparked threats of retaliation while Vice President JD Vance attacked longstanding European allies at a security conference at the weekend. Plans to negotiate an end to the war in Ukraine have left the bloc on the sidelines.

Investors may demand higher yields on government debt across the European region on concern officials will seek to beef up military investment. Upgrading defense and protecting Ukraine may cost Europe’s major powers an additional $3.1 trillion over 10 years, according to Bloomberg Economics estimates.

“The biggest impact from any peace deal on the rates market is probably more from increased fiscal spending rather than the disinflationary impact of falling gas prices,” Danske Bank A/S strategists including Minna Kuusisto wrote in a note. “More fiscal spending could lead to more inflation in the long run, thus adding pressure on the long end of the yield curve.”

Elsewhere in Asia, Westpac Banking Corp.’s shares declined as much as 6.2% after profit and margins slipped. Japan’s economy expanded for a third straight quarter as companies boosted investment and net exports improved.

In commodities, oil extended its loss to a fourth day on the prospect of increased flows from Iraq and Russia as Trump pushes to end the three-year old war in Ukraine. Gold edged higher.