New Delhi–Lower-cost artificial intelligence models developed in China could undermine the U.S. technology rally by prompting investors to question whether American companies will earn sufficient returns on their massive AI spending, according to Jefferies strategist Christopher Wood.
In his latest weekly “GREED & Fear” note, Wood said the main market risk is not the expansion of AI itself, but the point at which investors begin scrutinizing returns on the enormous capital expenditures being made by U.S. technology companies.
“The key issue has always been one of timing in the sense of when the market will start to worry about the return on investment made in AI,” Wood wrote.
He said the AI investment trend continues to favor companies that provide infrastructure and equipment to hyperscale cloud operators rather than businesses focused primarily on developing AI applications.
Wood also highlighted the growing global adoption of Chinese large language models.
Chinese AI models processed 36.39 trillion tokens through the OpenRouter platform during the week ended July 19, up from 4.37 trillion in late April, according to data cited in the note. Leading U.S. models processed 7.39 trillion tokens during the same period.
“There is also a growing realization now that China has become a technological peer to the U.S. in AI, as well as in so many other areas,” Wood said.
He argued that financial markets have not yet fully accounted for China’s rapid progress in artificial intelligence.
Wood also warned that U.S. investment in AI is increasingly being financed through debt rather than companies’ internally generated cash.
He reiterated his view that U.S. equities have likely peaked as a share of global stock market capitalization and said investors should closely watch the absolute and relative performance of hyperscaler stocks.
His comments came as technology shares faced renewed global selling pressure.
South Korea’s Kospi index fell nearly 11% Tuesday, triggering a temporary trading halt. Samsung Electronics and SK Hynix were among the biggest decliners as investors raised concerns about the sustainability of the AI-driven market rally. (Source: IANS)
