DeepSeek's affordable model increases expect 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, dokuwiki.stream Feb 6 (Reuters) - Chinese investors are hurrying into AI-related stocks, wagering the expert system advance of home-grown startup DeepSeek will result in a boom in the sector and provide the effort to China in an intensifying Sino-U.S. innovation war.

Feverish buying has pumped up shares of Chinese chipmakers, software application designers and data centre operators in the middle of patriotic calls for 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 innovative and capable of developments that can complete with Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has actually 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 model 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 analysts and has since seen money 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%, helping stable 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, enhancing shares of firms in AI, semiconductors, huge data and robotics.

"2025 will witness a surge 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, expecting extensive adoption of both AI software and hardware by customers and companies alike.

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

The DeepSeek advancement illustrates how the U.S. attempt to slow China's technological development "has actually backfired, rather speeding up Chinese AI development," TF Securities said in a customer note. It called for wiki.vst.hs-furtwangen.de a repricing of Chinese innovation stocks which have underperformed U.S. peers recently amid increased regulatory scrutiny and geopolitical stress.

The introduction of DeepSeek might prompt even tighter U.S. innovation export constraints but that will only invite more government support and turbo-charge growth, the brokerage said.

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

The Wall Street bank estimates AI-enabled efficiency enhancement could increase profits by 2% for Chinese equities, while brighter development potential customers could result in a 20% appraisal uplift for Chinese companies, pipewiki.org narrowing the space with U.S. peers.

China's "hard tech" stocks trade at a price representing 23.6 times revenues, 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", is 31, showed the Goldman report dated Feb 4.

DeepSeek has actually produced such a buzz that Chinese companies up and down the AI value chain, from chipmakers to cloud service providers are exploring possibilities with the start-up'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, effective companies will emerge in what he called an epoch-making transformation.

However, Wang Zhuo, partner of Shanghai Zhuozhu Investment Management, bphomesteading.com was more mindful.

"Many business are still far method from creating earnings 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)