DeepSequel

China’s rapid technological ascent is fundamentally disrupting global industries by eroding the capital-based moats of Western incumbents. Emerging Markets Analyst Laura Fyfe highlights how Chinese firms, such as DeepSeek in AI and Unitree in robotics, are delivering high-performance products at a fraction of the cost, effectively challenging established market leaders. This shift signals a re-establishment of the capital cycle, where excessive profitability in sectors like memory chips invites aggressive capacity expansion from Chinese competitors. To navigate this landscape, investors must distinguish between vulnerable capital-intensive businesses and resilient, "toll-road" models—such as Shenzhou International or Tencent—or those with geographically unique, non-replicable assets like Copa Airlines. Ultimately, the durability of a competitive advantage depends on whether a company’s moat can withstand the influx of deep-pocketed, patient capital that characterizes China’s current industrial strategy.