DeepSeek's low-cost design enhances expect China AI transformation

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, wagering the expert system advance of home-grown startup DeepSeek will result in a boom in the sector forum.altaycoins.com and provide the effort to China in a magnifying Sino-U.S. innovation war.

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

"DeepSeek's breakthrough reveals Chinese engineers are innovative 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."

DeepSeek shocked Silicon Valley and rocked Wall Street late last month with the announcement of a competitive large language design that was seemingly 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 actually given that 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 surged more than 11%, assisting steady the Hong Kong market as the U.S. added 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, increasing 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 positive about chances developed by this transformation," Zhou said, expecting widespread adoption of both AI hardware and software application by consumers and services alike.

Likely recipients 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. attempt to slow China's technological improvement "has backfired, rather accelerating Chinese AI development," TF Securities said in a client note. It required a repricing of Chinese technology stocks which have actually underperformed U.S. peers in recent years amid increased regulatory scrutiny and geopolitical stress.

The emergence of DeepSeek might prompt even tighter U.S. technology export constraints however that will just invite more government assistance and turbo-charge growth, the brokerage said.

Goldman Sachs anticipates Chinese developments in AI development and application "might materially change" the stock market trajectory.

The Wall Street bank estimates AI-enabled performance improvement might increase incomes by 2% for Chinese equities, while brighter development prospects might lead to a 20% appraisal uplift for Chinese companies, narrowing the gap with U.S. peers.

China's "tough tech" stocks trade at a rate representing 23.6 times earnings, while "soft tech" shares trade at 13.9. The price-to-earnings ratio of the greatest U.S. tech stocks, the so-called "Mag 7", is 31, revealed the Goldman report dated Feb 4.

DeepSeek has created such a buzz that Chinese companies up and down the AI value chain, macphersonwiki.mywikis.wiki from chipmakers to cloud service suppliers are exploring possibilities with the start-up's low-priced 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, wagering large, successful companies will emerge in what he called an epoch-making revolution.

However, Wang Zhuo, partner of Shanghai Zhuozhu Investment Management, archmageriseswiki.com was more mindful.

"Many companies are still far way from producing benefit from AI ... As a value financier, I don't feel positive putting cash into these stocks." (Reporting by Samuel Shen and Jiaxing Li; Editing by Vidya Ranganathan and Christopher Cushing)