DeepSeek's affordable design enhances expect China AI revolution

DeepSeek stirs nationalistic fever amidst Sino-U.S. competition

AI-related stocks in China and Hong Kong rise

By Samuel Shen and Jiaxing Li

SHANGHAI/HONGKONG, Feb 6 (Reuters) - Chinese financiers are hurrying into AI-related stocks, betting the synthetic intelligence advance of home-grown start-up DeepSeek will lead to a boom in the sector and the effort to China in an intensifying Sino-U.S. technology war.

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

"DeepSeek's breakthrough shows Chinese engineers are creative and capable of developments that can complete 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 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 minute by Huaxi Securities analysts and has because 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 companies surged more than 11%, assisting constant 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 likewise 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 optimistic about chances developed by this revolution," Zhou said, expecting widespread adoption of both AI software and hardware by customers and forum.pinoo.com.tr 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 highlights how the U.S. effort to slow China's technological improvement "has backfired, instead speeding up Chinese AI development," TF Securities said in a customer note. It called for a repricing of Chinese innovation stocks which have actually underperformed U.S. peers in the last few years amidst increased regulatory examination and geopolitical tension.

The introduction of DeepSeek might trigger even tighter U.S. technology export constraints but that will just welcome more government support and turbo-charge development, the brokerage said.

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

The Wall Street bank estimates AI-enabled efficiency improvement could increase profits by 2% for Chinese equities, while brighter development potential customers might lead to a 20% appraisal uplift for Chinese companies, narrowing the space with U.S. peers.

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

DeepSeek has produced such a buzz that Chinese companies up and down the AI value chain, from chipmakers to cloud service companies are checking out 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 big, effective 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 method from producing benefit from AI ... As a worth investor, I do not feel great putting cash into these stocks." (Reporting by Samuel Shen and Jiaxing Li; Editing by Vidya Ranganathan and Christopher Cushing)