DeepSeek’s low-cost design boosts wish for China AI transformation

DeepSeek stirs nationalistic fever amidst 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 hurrying into AI-related stocks, wagering the expert system advance of home-grown start-up DeepSeek will lead to a boom in the sector and give the effort to China in a heightening Sino-U.S. technology war.

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

“DeepSeek’s development shows Chinese engineers are innovative and efficient in developments that can take on 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 late last month with the statement of a competitive big language design that was seemingly more affordable to develop than those of big-spending U.S. leaders such as OpenAI and Meta.

The event was explained as a watershed moment by Huaxi Securities analysts and has because 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 stable the Hong Kong market as the U.S. added a 10% tariff to Chinese imports.

On the mainland, financiers returning from a week-long Lunar New Year vacation on Wednesday also piled into the tech sector, enhancing 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 really optimistic about opportunities developed by this transformation,” Zhou said, expecting widespread adoption of both AI software and hardware by consumers and companies alike.

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

The DeepSeek development highlights how the U.S. effort to slow China’s technological development “has actually backfired, instead accelerating Chinese AI development,” TF Securities said in a client note. It called for a repricing of Chinese innovation stocks which have underperformed U.S. peers in current years in the middle of increased regulatory scrutiny and geopolitical stress.

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

Goldman Sachs expects Chinese advancements in AI development and application “could materially modify” the stock market trajectory.

The Wall Street bank approximates AI-enabled efficiency enhancement might increase earnings by 2% for Chinese equities, while brighter growth potential customers might cause a 20% appraisal uplift for Chinese companies, narrowing the space with U.S. peers.

China’s “difficult tech” stocks trade at a cost representing 23.6 times earnings, 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 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 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, betting large, successful business will emerge in what he called an epoch-making transformation.

However, asteroidsathome.net Wang Zhuo, partner of Shanghai Zhuozhu Investment Management, was more mindful.

“Many business are still far way from creating benefit from AI … As a worth financier, I don’t feel great putting money into these stocks.” (Reporting by Samuel Shen and Jiaxing Li