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DeepSeek's low-cost design boosts hope for China AI transformation

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

AI-related stocks in China and Hong Kong rise

By Samuel Shen and Jiaxing Li

SHANGHAI/HONGKONG, passfun.awardspace.us Feb 6 (Reuters) - Chinese financiers are rushing into AI-related stocks, wagering the artificial intelligence advance of home-grown startup DeepSeek will lead to a boom in the sector and provide the effort to China in a heightening Sino-U.S. technology war.

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

"DeepSeek's advancement shows Chinese engineers are imaginative and efficient in inventions that can take on 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 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 experts and has considering 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% this week while indices tracking chipmakers and IT companies surged more than 11%, helping constant 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 holiday on Wednesday also stacked into the tech sector, enhancing shares of firms in AI, semiconductors, big data and robotics.

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

"We're very optimistic about opportunities produced by this revolution," Zhou said, expecting widespread adoption of both AI hardware and software 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 advancement illustrates how the U.S. effort to slow China's technological improvement "has backfired, rather accelerating Chinese AI innovation," TF Securities said in a client note. It required a repricing of Chinese innovation stocks which have underperformed U.S. peers in current years in the middle of increased regulatory analysis and geopolitical tension.

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

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

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

China's "difficult tech" stocks trade at a rate 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, hikvisiondb.webcam 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 users.atw.hu down the AI value chain, from chipmakers to cloud provider are exploring possibilities with the start-up's inexpensive 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, will emerge in what he called an epoch-making revolution.

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

"Many companies are still far way from generating profit 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)