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Open-weight Chinese AI models could squeeze US AI margins, Deutsche Bank says
Deutsche Bank links the outlook to recent China model releases that have already weighed on AI and semiconductor stocks, with the Philly Semiconductor Index down 9.97% last week.
Deutsche Bank strategists say China’s AI ecosystem is advancing quickly, with open-weight Chinese models catching up to higher-end systems while being priced closer to mid-tier US offerings. In a note cited by FXStreet, the bank argues that cheaper, broader adoption could lift global AI take-up, but it may also pressure US AI infrastructure economics.
According to FXStreet, Deutsche Bank expects open-weight releases to accelerate commoditisation, citing how recent Chinese releases have already weighed on AI and semiconductor stocks. It points to the Philly semiconductor index falling 9.97% over the week, with Friday down 1.63%, its biggest weekly decline since last year’s Liberation Day tariff announcements.
The note also flags potential knock-on effects for US spending, warning that US AI capex returns could come under pressure and raising the risk of a capex overcycle if margins weaken. Deutsche Bank further says evolving AI technology stacks could intensify geopolitical fragmentation, alongside any concerns tied to an “AI trade” and US-China market dynamics.
FXStreet adds that geopolitical fears and renewed anxiety around AI trade risks contributed to broad equity selling, which was particularly visible in chip stocks. The piece also notes that investors are watching for further market drivers, including the UK employment report on Tuesday.