DeepSeek's low-priced model boosts expect 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 rushing into AI-related stocks, betting the expert system advance of home-grown start-up DeepSeek will result in a boom in the sector and provide the effort to China in a magnifying Sino-U.S. innovation war.

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

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

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

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

The Hang Seng AI Index has actually jumped more than 5% today while indices tracking chipmakers and IT firms surged more than 11%, helping steady 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 holiday on Wednesday also stacked into the tech sector, boosting shares of firms in AI, semiconductors, huge information and robotics.

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

"We're extremely optimistic about opportunities developed by this transformation," Zhou said, anticipating extensive adoption of both AI software and hardware by consumers and organizations alike.

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

The DeepSeek development illustrates how the U.S. attempt to slow China's technological advancement "has backfired, rather accelerating Chinese AI innovation," TF Securities said in a customer note. It required a repricing of Chinese technology stocks which have underperformed U.S. peers in recent years amid increased regulative analysis and geopolitical stress.

The introduction of DeepSeek could prompt even tighter U.S. innovation export constraints but that will just invite more government assistance and turbo-charge development, the brokerage said.

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

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

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

DeepSeek has actually developed such a buzz that Chinese companies up and down the AI value chain, from chipmakers to cloud provider are checking out possibilities with the startup's inexpensive services, consisting of such as Huawei Technologies, Alibaba and Baidu.

Yi Xiangjun, partner of Shenzhen Black Stone Asset Management, classicalmusicmp3freedownload.com said he is "all in" China's AI and tech stocks, betting large, successful business 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 method from creating benefit from AI ... As a value financier, I do not feel great putting cash into these stocks." (Reporting by Samuel Shen and Jiaxing Li; Editing by Vidya Ranganathan and Christopher Cushing)