DeepSeek's low-priced model increases hope for China AI transformation

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

AI-related stocks in China and Hong Kong surge

By Samuel Shen and Jiaxing Li

SHANGHAI/HONGKONG, Feb 6 (Reuters) - Chinese financiers are rushing into AI-related stocks, betting the synthetic intelligence advance of home-grown startup DeepSeek will cause a boom in the sector and provide the effort to China in a heightening Sino-U.S. technology war.

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

"DeepSeek's development shows Chinese engineers are imaginative and efficient in developments that can take on Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has likewise stirred nationalistic fever in capital markets."

DeepSeek stunned Silicon Valley and rocked Wall Street late last month with the statement of a competitive large language design that was seemingly more affordable to establish than those of big-spending U.S. leaders such as OpenAI and wikibase.imfd.cl Meta.

The occasion was explained as a watershed moment by Huaxi Securities experts and has since 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 consistent the Hong Kong market as the U.S. added a 10% tariff to Chinese imports.

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

"2025 will witness a surge of AI applications," said Zhou Yingbo, head of investment at Futures Vessel Capital.

"We're very optimistic about chances developed by this transformation," Zhou said, anticipating prevalent adoption of both AI hardware and software application by consumers and services alike.

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

The DeepSeek development shows how the U.S. effort to slow China's technological improvement "has actually backfired, instead accelerating Chinese AI innovation," TF Securities said in a client note. It required a repricing of Chinese technology stocks which have underperformed U.S. peers in current years amid increased regulative analysis and geopolitical stress.

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

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

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

China's "difficult tech" stocks trade at a rate representing 23.6 times profits, 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, lespoetesbizarres.free.fr revealed the Goldman report dated Feb 4.

DeepSeek has actually developed 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 low-priced services, including heavyweights such as Huawei Technologies, Alibaba and Baidu.

Yi Xiangjun, partner of Shenzhen Black Stone Asset Management, bphomesteading.com said he is "all in" China's AI and tech stocks, wagering large, successful business will emerge in what he called an epoch-making revolution.

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

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