Markets React to Trump's AI Plan & China's Share Boost

This week, key news emerged from the US and China, the world’s two largest economies, causing market volatility across key market sectors. 

Here’s what you need to know about the latest shifts:

Trump’s $500 Billion AI Plans

On 21 January 2025, US President Donald Trump, alongside notable tech leaders including OpenAI’s Sam Altman, Oracle’s Larry Ellison, and SoftBank’s Masayoshi Son, unveiled the Stargate project, a groundbreaking initiative with a $500 billion investment. 

The project will establish a new company, Stargate, which will initially be funded by SoftBank, Oracle, and OpenAI. Additionally, major technology giants Nvidia, Microsoft, and Arm have been named "key initial technology partners" for the venture. 

Stargate aims to build cutting-edge data centers across the US that will power AI and drive innovation in AI infrastructure. With an ambitious plan to invest $500 billion by 2029, Trump described it as “the largest AI infrastructure project in history,” aiming to shape the future of AI technology on an unprecedented scale.

How Did Tech Stocks React?

Perhaps unsurprisingly, many tech giants saw impressive gains yesterday, Wednesday, 22 January. AI chipmaker Nvidia, which will supply chips for the project, surged more than 4%, pushing its market capitalisation to $3.6 trillion, surpassing Apple once again. Microsoft also saw a rise of around 4%, while Arm experienced a jump of nearly 16%. Meanwhile, Oracle and SoftBank gained 7% and 11%, respectively.

Besides tech companies, traders and investors may want to keep an eye on nuclear energy stocks, which may also be affected by this announcement. AI demands vast amounts of energy due to the strenuous computing power it uses, which, in turn, may increase the chances of companies looking for sustainable energy data centers, which can affect these companies. (Source: Reuters)

What Do Analysts Think?

Some analysts like Wedbush analyst Dan Ives believe “this is the start of a wave of massive AI investments to take place in the US,” adding that he expects “more big tech players to make announcements over the coming weeks.”

It may be worth noting, however, that despite the general optimism surrounding this project, some remain apprehensive. One of these individuals is Tesla CEO Elon Musk. Following the announcement, Musk responded to a post about the Stargate project, stating, “They don’t actually have money.”

As such, only time will tell how this project will shape the markets in the long run.

Asian Stocks Rise on China’s Share Boost Despite Trump’s Tarrifs Announcement 

Despite the economic challenges faced by China, including the impact of Trump's trade tariffs, today, Thursday, 23 January, marked a significant turning point for the Chinese economy and financial markets. 

The China Securities Regulatory Commission Chairman, Wu Qing, Deputy Finance Minister, Liao Min, and central bank official, Zou Lan, announced that the Chinese government plans to support local stocks and boost share prices. They called on local insurers and mutual funds to increase their equity holdings. 

As a result, China's benchmark index, the CSI 300, surged 1.8%, reaching its highest level in three weeks. Hong Kong’s Hang Seng index also gained about 1%, and the MSCI Asia Pacific index saw its fourth consecutive day of gains.

What’s Next for China?

On Tuesday, Trump announced that his administration was considering a 10% punitive tariff on Chinese imports in response to the flow of fentanyl from China into the US via Mexico and Canada. At the same time, China’s economy and markets continue to face significant challenges. 

As Alvin Tan, head of Asia FX strategy at RBC Capital Markets, pointed out, “the ongoing underperformance of Chinese equities serves as a clear signal of the country’s fundamental economic difficulties, including falling bond yields.” He said, “These issues highlight domestic struggles, and the imposition of additional US tariffs will likely worsen the situation, particularly as China becomes increasingly reliant on net exports to fuel growth.” 

With these developments unfolding, it will be interesting to see what the future holds for the world’s second-largest economy.

Conclusion

This week’s news, including Trump’s AI infrastructure announcement and the Chinese government’s support for local markets, has stirred significant movements in both US and Chinese markets. While the US tech sector benefits from the AI push, China faces new challenges amid rising tariffs and domestic economic struggles. As these developments unfold, their impact on global markets and the economy will remain critical to watch.