DeepSeek's low-cost design enhances hope for China AI revolution

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

AI-related stocks in China and Hong Kong surge

By Samuel Shen and Jiaxing Li

SHANGHAI/HONGKONG, Feb 6 (Reuters) - Chinese financiers are hurrying into AI-related stocks, wagering the synthetic intelligence advance of home-grown start-up DeepSeek will cause a boom in the sector and offer the effort to China in a magnifying Sino-U.S. innovation war.

Feverish buying has actually pumped up shares of Chinese chipmakers, software designers and data centre operators amid patriotic calls for 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 developments that can complete with Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has actually also 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 ostensibly less expensive 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 since 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 rose more than 11%, helping consistent the Hong Kong market as the U.S. included a 10% tariff to Chinese imports.

On the mainland, financiers returning from a week-long Lunar New Year holiday on Wednesday likewise piled into the tech sector, boosting shares of firms in AI, semiconductors, huge information 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 developed by this transformation," Zhou said, expecting widespread adoption of both AI software and tandme.co.uk hardware by customers and organizations alike.

Likely beneficiaries 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. attempt to slow China's technological improvement "has backfired, rather speeding up Chinese AI innovation," TF Securities said in a customer note. It called for a repricing of Chinese technology stocks which have underperformed U.S. peers in the last few years amid increased regulatory examination and geopolitical stress.

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

Goldman Sachs expects Chinese advancements in AI development and application "might materially modify" the stock market trajectory.

The Wall Street bank approximates AI-enabled performance enhancement might increase revenues by 2% for Chinese equities, while brighter development prospects could cause a 20% appraisal uplift for Chinese firms, narrowing the gap 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 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 companies up and down the AI value chain, from chipmakers to cloud company are checking out possibilities with the startup's affordable services, consisting of 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 large, successful companies will emerge in what he called an epoch-making revolution.

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

"Many companies are still far method from generating revenue from AI ... As a value financier, I do not feel great putting money into these stocks." (Reporting by Samuel Shen and Jiaxing Li; Editing by Vidya Ranganathan and Christopher Cushing)