Chinese investors pumped money into shares of chipmakers, software designers and data centre operators this week, betting the country’s technology sector was set for a boom following DeepSeek’s advances in artificial intelligence.
DeepSeek shocked Silicon Valley and rocked Wall Street last week with the announcement of a competitive large language model that it claimed was far cheaper to develop than those of big-spending US leaders such as OpenAI and Meta.
Chinese investors missed most of the action, with markets in Hong Kong and China being closed for the Lunar New Year holiday.
Also on AF: China’s Cloud Providers, Chipmakers, Rush to Use DeepSeek AI
But as markets re-opened this week, investors piled into the tech sector, boosting shares of firms in AI, semiconductors, big data and robotics.
The furious buying led Hang Seng’s AI Index to end the week with gains of more than 8% while indices tracking chipmakers and IT firms surged more than 11%.
Analysts at China’s Huaxi Securities described DeepSeek’s ‘breakthrough’ as a watershed moment.
Meanwhile, Zhou Yingbo, head of investment at Futures Vessel Capital, said the event would make 2025 the year of “an explosion of AI applications”.
“We’re very optimistic about opportunities created by this revolution,” Zhou said, expecting widespread adoption of both AI hardware and software by consumers and businesses alike.
‘US sanctions have backfired’
For many investors the DeepSeek development was also a sign that China was capable of holding its ground amid an intense tech battle with rival United States, especially at a time when President Donald Trump has sparked off another trade war with Beijing
“DeepSeek’s breakthrough shows Chinese engineers are creative and capable of inventions that can compete with Silicon Valley,” said China Europe Capital Chairman Abraham Zhang. “It has also stirred nationalistic fever in capital markets.”
In keeping with that sentiment, TF Securities said in a client note that development illustrated how American efforts to slow China’s technological advancement had “backfired” and instead, accelerated “Chinese AI innovation”.
The brokerage called for a repricing of Chinese technology stocks which have underperformed US peers in recent years amid increased regulatory scrutiny and geopolitical tension.
The emergence of DeepSeek could prompt even tighter U.S. technology export restrictions but that will only invite more government support and turbo-charge growth, it added.
‘Market altering event’
Goldman Sachs expects Chinese breakthroughs in AI development and application “could materially alter” the stock market trajectory.
The Wall Street bank estimates AI-enabled efficiency improvement could increase earnings by 2% for Chinese equities, while brighter growth prospects could lead to a 20% valuation uplift for Chinese firms, narrowing the gap with US peers.
China’s “hard tech” stocks trade at a price representing 23.6 times earnings, while “soft tech” shares trade at 13.9. The price-to-earnings ratio of the biggest US tech stocks, the so-called “Mag 7”, is 31, showed the Goldman report dated February 4.
DeepSeek has created such a buzz that Chinese companies up and down the AI value chain, from chipmakers to cloud service providers are exploring possibilities with the startup’s low-cost 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, betting large, successful companies will emerge in what he called an epoch-making revolution.
However, Wang Zhuo, partner of Shanghai Zhuozhu Investment Management, was more cautious.
“Many companies are still far way from generating profit from AI… As a value investor, I don’t feel confident putting money into these stocks.”
- Reuters, with additional editing by Vishakha Saxena
Also read:
China ‘Promoted DeepSeek AI Launch Prior to US Stock Plunge’
Curbing Chinese Access to US AI Models May be Hard: Analysts
Meta Set up ‘War Rooms’ to Study DeepSeek AI Model – Fortune
DeepSeek Breakthrough or Theft? US Probes ‘AI Data Breach’
Tech Selloff Extends to Japan as DeepSeek Puts Focus on AI Costs
‘AI Breakthrough’ by China’s DeepSeek Rocks US Tech Giants
SoftBank, UAE’s MGX Join $500bn Data Centre Deal With OpenAI
Bytedance ‘Plans $20 Billion Outlay on AI Infrastructure This Year’
