DeepSeek’s affordable model boosts wish for China AI transformation

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

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, wagering the expert system advance of home-grown startup DeepSeek will result in a boom in the sector and provide the initiative to China in an intensifying Sino-U.S. technology war.

Feverish purchasing has pumped up shares of Chinese chipmakers, software application designers and information centre operators amid patriotic calls for an upward repricing of Chinese possessions as U.S. President Donald Trump recharges a trade war with fresh tariffs.

“DeepSeek’s advancement shows Chinese engineers are innovative and capable of developments that can complete with Silicon Valley,” said China Europe Capital Chairman Abraham Zhang. “It has also stirred nationalistic fever in capital markets.”

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

The occasion was explained as a watershed minute by Huaxi Securities experts 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 companies rose more than 11%, assisting stable the Hong Kong market as the U.S. included a 10% tariff to Chinese imports.

On the mainland, investors returning from a week-long Lunar New Year vacation on Wednesday likewise piled into the tech sector, boosting shares of companies in AI, semiconductors, big 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 created by this revolution,” Zhou said, anticipating prevalent adoption of both AI software and hardware by consumers 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 development illustrates how the U.S. attempt to slow China’s technological improvement “has backfired, instead accelerating Chinese AI development,” TF Securities said in a client note. It required a repricing of Chinese innovation stocks which have underperformed U.S. peers in recent years amidst increased regulatory analysis and geopolitical stress.

The emergence of DeepSeek could trigger even tighter U.S. innovation export constraints but that will only invite more federal government assistance and turbo-charge development, clashofcryptos.trade the brokerage said.

Goldman Sachs expects Chinese developments in AI advancement and application “might materially change” the stock exchange trajectory.

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

China’s “hard tech” stocks trade at a cost representing 23.6 times profits, 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, showed the Goldman report dated Feb 4.

DeepSeek has produced such a buzz that Chinese companies up and down the AI value chain, from chipmakers to cloud service suppliers are exploring possibilities with the startup’s low-cost services, consisting of heavyweights such as Huawei Technologies, 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, ura.cc partner of Shanghai Zhuozhu Investment Management, was more mindful.

“Many business are still far method from creating earnings from AI … As a value investor, I don’t feel confident putting money into these stocks.” (Reporting by Samuel Shen and Jiaxing Li