THE rise of Chinese artificial intelligence (AI) startup DeepSeek is forcing investors to re-evaluate the nation’s leading Internet companies and their potential to capitalise on AI that’s boosted global peers.
Rise of Chinese AI Startup DeepSeek
Market watchers are increasingly touting how the AI model will be a game changer for Chinese tech companies and their stocks, which have remained under pressure by concerns over the economy. Already Alibaba Group Holding shares surged last week over such hype, with a gauge of tech stocks entering a bull market on Friday.
Investor Focus Shifts
“The refreshed attention could shift investor focus from ‘thinking about risks’ to ‘thinking about potential’ when they look at the large Chinese Internet names,” said Jian Shi Cortesi, a portfolio manager at Gam Investment Management in Zurich. “This is positive, especially given the big valuation discount of these names compared to US peers,” she added.
Upcoming Results Season
The upcoming results season may provide stock catalysts in the form of management comments on progress with AI models and demand for cloud services. Meanwhile, options traders have boosted bets on China tech, and the stocks remain historically cheap.
Valuation Gap
The Hang Seng Tech Index entered a bull market after last week’s 9 per cent gain. Still, the gauge of Hong Kong-listed Chinese tech stocks is trading at less than 17 times estimated forward earnings, below the Nasdaq 100’s 27 times and even its own five-year average of 25 times.
Conclusion
The rise of DeepSeek is expected to democratize AI in China, encouraging usage and spending, and benefiting cloud operators such as Alibaba and Tencent. As investors re-evaluate the nation’s leading Internet companies, the focus is shifting from risks to potential, and the valuation gap between Chinese and US tech stocks is expected to narrow.
FAQs
Q: What is the impact of DeepSeek on Chinese tech stocks?
A: DeepSeek is expected to democratize AI in China, encouraging usage and spending, and benefiting cloud operators such as Alibaba and Tencent.
Q: How will the rise of DeepSeek affect the valuation gap between Chinese and US tech stocks?
A: The rise of DeepSeek is expected to narrow the valuation gap between Chinese and US tech stocks, as investors re-evaluate the nation’s leading Internet companies and focus on their potential.
Q: What are the implications for cloud service providers such as Alibaba and Tencent?
A: The rise of DeepSeek is expected to benefit cloud operators such as Alibaba and Tencent, as users rely on cloud computing to run AI infrastructure.
