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DeepSeek's affordable model boosts wish for China AI revolution

DeepSeek stirs nationalistic fever amidst 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 rushing into AI-related stocks, betting the artificial intelligence advance of home-grown start-up DeepSeek will cause a boom in the sector and offer the initiative to China in an intensifying Sino-U.S. innovation war.

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

"DeepSeek's development shows Chinese engineers are creative and capable of innovations that can take on Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has also stirred nationalistic fever in capital markets."

DeepSeek stunned Silicon Valley and rocked Wall Street late last month with the announcement 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 event was explained as a watershed moment by Huaxi Securities experts and has actually given that seen money gushing into AI-related stocks in mainland China and Hong Kong.

The Hang Seng AI Index has actually leapt more than 5% today while indices tracking chipmakers and IT firms 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 stacked into the tech sector, increasing shares of firms in AI, semiconductors, huge data 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, anticipating widespread adoption of both AI hardware and software application by customers and businesses alike.

Likely include 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. attempt to slow China's technological development "has backfired, instead speeding up Chinese AI innovation," TF Securities said in a customer note. It called for a repricing of Chinese innovation stocks which have underperformed U.S. peers over the last few years in the middle of increased regulative analysis and geopolitical tension.

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

Goldman Sachs anticipates Chinese breakthroughs in AI development and application "could materially alter" the stock market trajectory.

The Wall Street bank approximates AI-enabled efficiency enhancement could increase earnings by 2% for Chinese equities, while brighter growth potential customers 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 rate representing 23.6 times revenues, while "soft tech" shares trade at 13.9. The price-to-earnings ratio of the most significant U.S. tech stocks, equipifieds.com the so-called "Mag 7", is 31, asteroidsathome.net showed the Goldman report dated Feb 4.

DeepSeek has produced such a buzz that Chinese companies up and larsaluarna.se down the AI worth chain, from chipmakers to cloud provider are exploring possibilities with the start-up's low-cost services, consisting of heavyweights such as Huawei Technologies, Alibaba and wiki.insidertoday.org Baidu.

Yi Xiangjun, partner of Shenzhen Black Stone Asset Management, said he is "all in" China's AI and tech stocks, betting large, effective business will emerge in what he called an epoch-making transformation.

However, Wang Zhuo, partner of Shanghai Zhuozhu Investment Management, photorum.eclat-mauve.fr was more careful.

"Many business are still far way from creating earnings from AI ... As a value investor, I do not feel positive putting money into these stocks." (Reporting by Samuel Shen and Jiaxing Li; Editing by Vidya Ranganathan and Christopher Cushing)