Chinese investors are eagerly investing in AI-related stocks, anticipating that advancements by domestic startup DeepSeek will spark a sector boom, positioning China advantageously in the escalating Sino-U.S. technology rivalry.
Intense buying activity has driven up the shares of Chinese chipmakers, software developers, and data center operators, fueled by patriotic sentiment calling for a reevaluation of Chinese assets as U.S. President Donald Trump reignites trade conflicts with new tariffs.
Abraham Zhang, Chairman of China Europe Capital, highlighted DeepSeek’s breakthrough as evidence of the innovative capabilities of Chinese engineers to rival Silicon Valley. This achievement has sparked national pride in the financial markets.
DeepSeek stunned Silicon Valley with the unveiling of a large language model that was reportedly developed at a lower cost than similar models by prominent U.S. firms like OpenAI and Meta.
The announcement, regarded by Huaxi Securities analysts as a pivotal moment, has led to substantial investment in AI stocks across China and Hong Kong, with the Hang Seng AI Index rising over 5% and indices for chipmakers and IT firms soaring more than 11% this week.
Investors in mainland China have also heavily invested in AI, semiconductors, big data, and robotics sectors after returning from the Lunar New Year break.
Zhou Yingbo of Futures Vessel Capital predicts a significant surge in AI applications by 2025, driven by consumer and business demand for AI hardware and software. Beneficiaries are expected to include companies like Nancal Technology and Suzhou MedicalSystem Technology.
TF Securities noted that DeepSeek’s progress highlights how U.S. efforts to hinder China’s technological growth have instead accelerated Chinese innovation in AI. The firm suggested that Chinese tech stocks are due for a price adjustment, as they have lagged behind their U.S. counterparts recently due to heightened regulatory scrutiny and geopolitical tensions.
Goldman Sachs forecasts that Chinese AI advancements could significantly impact the stock market, potentially increasing earnings by 2% for Chinese equities and boosting valuations by 20%, bringing them closer to U.S. levels. Current evaluations show Chinese “hard tech” stocks at a price-to-earnings ratio of 23.6x and “soft tech” at 13.9x, compared to 31x for major U.S. tech stocks.
Interest in DeepSeek’s developments is widespread among Chinese companies along the AI value chain, including giants like Huawei, Alibaba, and Baidu, who are exploring collaborations with the startup’s cost-effective services.
Meanwhile, as some investors, like Yi Xiangjun of Shenzhen Black Stone Asset Management, are fully committed to China’s AI and tech sectors, others, such as Wang Zhuo of Shanghai Zhuozhu Investment Management, remain cautious, wary of the profitability timelines within the AI space.
