Chinese Investors Flock to AI-Related Stocks on Back of DeepSeek’s Breakthrough
China’s AI Revolution Heats Up
Chinese investors are rushing into AI-related stocks, betting that the artificial intelligence advance of home-grown startup DeepSeek will lead to a boom in the sector and give the initiative to China in an intensifying Sino-US technology war.
Feverish Buying
Feverish buying has pumped up shares of Chinese chipmakers, software designers, and data center operators amid patriotic calls for an upward repricing of Chinese assets as US President Donald Trump recharges a trade war with fresh tariffs.
DeepSeek’s Breakthrough
"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."
DeepSeek shocked Silicon Valley and rocked Wall Street late last month with the announcement of a competitive large language model that was ostensibly cheaper to develop than those of big-spending US leaders such as OpenAI and Meta.
Market Reaction
The event was described as a watershed moment by Huaxi Securities analysts and has since seen money gushing into AI-related stocks in mainland China and Hong Kong. The Hang Seng AI Index has jumped more than 5 per cent this week, while indices tracking chipmakers and IT firms surged more than 11 per cent, helping steady the Hong Kong market as the US added a 10 per cent tariff to Chinese imports.
Mainland China’s Tech Sector
On the mainland, investors returning from a week-long Chinese New Year holiday on Wednesday (Feb 5) also piled into the tech sector, boosting shares of firms in AI, semiconductors, big data, and robotics.
Industry Insights
"2025 will witness an explosion of AI applications," said Zhou Yingbo, head of investment at Futures Vessel Capital. "We’re very optimistic about opportunities created by this revolution, expecting widespread adoption of both AI hardware and software by consumers and businesses alike."
Likely Beneficiaries
Likely beneficiaries include Nancal Technology, Suzhou MedicalSystem Technology, Doctorglasses Chain, Bestechnic Shanghai, and Ucap Cloud Information Technology, Huaxi Securities said.
Analyst Views
The DeepSeek development illustrates how the US attempt to slow China’s technological advancement "has backfired, instead accelerating Chinese AI innovation," TF Securities said in a client note. It called for a repricing of Chinese technology stocks which have underperformed US peers in recent years amid increased regulatory scrutiny and geopolitical tension.
Conclusion
The emergence of DeepSeek could prompt even tighter US technology export restrictions, but that will only invite more government support and turbo-charge growth, the brokerage said.
FAQs
Q: What is the significance of DeepSeek’s breakthrough?
A: DeepSeek’s breakthrough shows Chinese engineers are creative and capable of inventions that can compete with Silicon Valley, and it has also stirred nationalistic fever in capital markets.
Q: How has the market reacted to DeepSeek’s announcement?
A: The event was described as a watershed moment by Huaxi Securities analysts and has since seen money gushing into AI-related stocks in mainland China and Hong Kong. The Hang Seng AI Index has jumped more than 5 per cent this week.
Q: Who are the likely beneficiaries of the AI revolution?
A: Likely beneficiaries include Nancal Technology, Suzhou MedicalSystem Technology, Doctorglasses Chain, Bestechnic Shanghai, and Ucap Cloud Information Technology, according to Huaxi Securities.
