DeepSeek's inexpensive design increases wish for China AI transformation

DeepSeek stirs nationalistic fever in the middle of Sino-U.S. competition

AI-related stocks in China and Hong Kong rise

By Samuel Shen and Jiaxing Li

SHANGHAI/HONGKONG, Feb 6 (Reuters) - Chinese financiers are hurrying into AI-related stocks, betting the artificial intelligence advance of home-grown start-up DeepSeek will lead to a boom in the sector and give the initiative to China in an intensifying Sino-U.S. technology war.

Feverish purchasing has actually pumped up shares of Chinese chipmakers, software designers and data centre operators in the middle of patriotic require an upward repricing of Chinese properties as U.S. President Donald Trump recharges a trade war with fresh tariffs.

"DeepSeek's development reveals Chinese engineers are creative and efficient in inventions that can complete with Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has likewise stirred nationalistic fever in capital markets."

DeepSeek surprised Silicon Valley and rocked Wall Street late last month with the statement of a competitive big language design that was ostensibly more affordable to develop than those of big-spending U.S. leaders such as OpenAI and Meta.

The occasion was explained as a watershed moment by Huaxi Securities experts and has actually because seen cash gushing into AI-related stocks in mainland China and Hong Kong.

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

On the mainland, financiers from a week-long Lunar New Year vacation on Wednesday also stacked into the tech sector, improving shares of companies in AI, semiconductors, huge data and robotics.

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

"We're very optimistic about opportunities created by this transformation," Zhou said, expecting prevalent adoption of both AI hardware and software application by customers and organizations alike.

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

The DeepSeek advancement highlights how the U.S. effort to slow China's technological advancement "has actually backfired, instead speeding up Chinese AI innovation," TF Securities said in a client note. It called for a repricing of Chinese technology stocks which have underperformed U.S. peers recently in the middle of increased regulative scrutiny and geopolitical tension.

The development of DeepSeek might trigger even tighter U.S. technology export constraints but that will just invite more government support and turbo-charge growth, the brokerage said.

Goldman Sachs expects Chinese developments in AI advancement and application "could materially change" the stock exchange trajectory.

The Wall Street bank estimates AI-enabled efficiency improvement could increase profits by 2% for Chinese equities, engel-und-waisen.de while brighter growth prospects could cause a 20% appraisal uplift for Chinese companies, narrowing the space with U.S. peers.

China's "hard tech" stocks trade at a cost representing 23.6 times incomes, while "soft tech" shares trade at 13.9. The price-to-earnings ratio of the biggest U.S. tech stocks, the so-called "Mag 7", oke.zone is 31, showed the Goldman report dated Feb 4.

DeepSeek has actually created such a buzz that Chinese companies up and down the AI worth chain, from chipmakers to cloud provider are exploring possibilities with the startup's inexpensive 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, wagering big, successful companies will emerge in what he called an epoch-making transformation.

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

"Many companies are still far way from creating benefit from AI ... As a value investor, I don't feel great putting cash into these stocks." (Reporting by Samuel Shen and Jiaxing Li; Editing by Vidya Ranganathan and Christopher Cushing)