DeepSeek's low-priced model increases wish for China AI revolution

DeepSeek stirs nationalistic fever amid 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 rushing into AI-related stocks, wagering the expert system advance of home-grown start-up will lead to a boom in the sector and give the initiative to China in a heightening Sino-U.S. innovation war.

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

"DeepSeek's advancement reveals Chinese engineers are innovative and capable of creations that can take on Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has actually likewise stirred nationalistic fever in capital markets."

DeepSeek shocked Silicon Valley and rocked Wall Street late last month with the statement of a competitive big language model that was ostensibly less expensive to develop than those of big-spending U.S. leaders such as OpenAI and Meta.

The occasion was explained as a watershed moment by Huaxi Securities analysts and has actually since seen money gushing into AI-related stocks in mainland China and ura.cc Hong Kong.

The Hang Seng AI Index has jumped more than 5% this week while indices tracking chipmakers and IT companies surged 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 likewise piled into the tech sector, enhancing shares of firms in AI, wiki.vst.hs-furtwangen.de semiconductors, huge 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 opportunities produced by this revolution," Zhou said, expecting widespread adoption of both AI software and hardware by consumers and services alike.

Likely recipients include Nancal Technology, Suzhou MedicalSystem Technology, Doctorglasses Chain, Bestechnic Shanghai and Ucap Cloud Details Technology, Huaxi Securities said.

The DeepSeek development highlights how the U.S. attempt to slow China's technological advancement "has backfired, rather accelerating Chinese AI innovation," TF Securities said in a customer note. It required a repricing of Chinese innovation stocks which have actually underperformed U.S. peers in current years in the middle of increased regulatory examination and geopolitical tension.

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

Goldman Sachs anticipates Chinese developments in AI advancement and application "could materially modify" the stock market trajectory.

The Wall Street bank estimates AI-enabled effectiveness enhancement could increase earnings by 2% for Chinese equities, while brighter growth potential customers could cause a 20% appraisal uplift for Chinese firms, narrowing the space with U.S. peers.

China's "difficult tech" stocks trade at a price 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, the so-called "Mag 7", is 31, revealed the Goldman report dated Feb 4.

DeepSeek has developed such a buzz that Chinese companies up and down the AI value chain, from chipmakers to cloud provider are checking out possibilities with the start-up's inexpensive services, including heavyweights such as Huawei Technologies, Alibaba and trade-britanica.trade Baidu.

Yi Xiangjun, partner of Shenzhen Black Stone Asset Management, said he is "all in" China's AI and chessdatabase.science 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 mindful.

"Many companies are still far method from generating make money from AI ... As a worth financier, I do not feel positive putting money into these stocks." (Reporting by Samuel Shen and yewiki.org Jiaxing Li; Editing by Vidya Ranganathan and forum.tinycircuits.com Christopher Cushing)