GitLab

DeepSeek's low-cost model improves wish for China AI transformation

DeepSeek stirs nationalistic fever amid Sino-U.S. competition

AI-related stocks in China and Hong Kong surge

By Samuel Shen and gratisafhalen.be Jiaxing Li

SHANGHAI/HONGKONG, Feb 6 (Reuters) - Chinese investors are rushing into AI-related stocks, wagering the artificial intelligence advance of home-grown startup DeepSeek will cause a boom in the sector and offer the initiative to China in a heightening Sino-U.S. innovation war.

Feverish buying has actually pumped up shares of Chinese chipmakers, software designers and data centre operators amidst patriotic require an upward repricing of Chinese assets as U.S. President Donald Trump charges a trade war with fresh tariffs.

"DeepSeek's breakthrough shows Chinese engineers are imaginative and capable of innovations that can take on Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has also stirred nationalistic fever in capital markets."

DeepSeek stunned Silicon Valley and rocked Wall Street late last month with the statement of a competitive big language design that was ostensibly less expensive to establish than those of big-spending U.S. leaders such as OpenAI and setiathome.berkeley.edu Meta.

The event was explained as a watershed moment by Huaxi Securities analysts and has considering that seen cash gushing into AI-related stocks in mainland China and Hong Kong.

The Hang Seng AI Index has jumped more than 5% this week while indices tracking chipmakers and IT firms surged more than 11%, assisting stable the Hong Kong market as the U.S. included a 10% tariff to Chinese imports.

On the mainland, investors returning from a week-long Lunar New Year holiday on Wednesday likewise stacked into the tech sector, boosting shares of companies in AI, semiconductors, big data and robotics.

"2025 will witness an explosion of AI applications," said Zhou Yingbo, head of financial investment at Futures Vessel Capital.

"We're extremely optimistic about chances created by this transformation," Zhou said, wolvesbaneuo.com anticipating prevalent adoption of both AI software and hardware by consumers and organizations alike.

Likely of Nancal Technology, Suzhou MedicalSystem Technology, Doctorglasses Chain, Bestechnic Shanghai and Ucap Cloud Details Technology, Huaxi Securities said.

The DeepSeek advancement illustrates how the U.S. attempt to slow China's technological improvement "has backfired, rather speeding up Chinese AI development," TF Securities said in a customer note. It called for a repricing of Chinese innovation stocks which have underperformed U.S. peers in current years in the middle of increased regulatory analysis and geopolitical stress.

The development of DeepSeek could trigger even tighter U.S. technology export constraints however that will only welcome more federal government assistance and turbo-charge growth, the brokerage said.

Goldman Sachs anticipates Chinese developments in AI advancement and application "might materially alter" the stock market trajectory.

The Wall Street bank approximates AI-enabled performance improvement might increase profits by 2% for Chinese equities, while brighter growth potential customers could lead to a 20% appraisal uplift for Chinese companies, narrowing the gap with U.S. peers.

China's "difficult tech" stocks trade at a rate representing 23.6 times earnings, while "soft tech" shares trade at 13.9. The price-to-earnings ratio of the greatest U.S. tech stocks, the so-called "Mag 7", is 31, revealed the Goldman report dated Feb 4.

DeepSeek has actually created such a buzz that Chinese business up and down the AI worth chain, from chipmakers to cloud provider are checking out possibilities with the startup's affordable services, including heavyweights such as Huawei Technologies, Alibaba and Baidu.

Yi Xiangjun, partner of Shenzhen Black Stone Asset Management, said he is "all in" China's AI and tech stocks, betting big, successful companies will emerge in what he called an epoch-making transformation.

However, Wang Zhuo, partner of Shanghai Zhuozhu Investment Management, was more careful.

"Many companies are still far way from producing earnings from AI ... As a value investor, I do not feel positive putting money into these stocks." (Reporting by Samuel Shen and Jiaxing Li; Editing by Vidya Ranganathan and Christopher Cushing)