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1 DeepSeek Fever Fuels Patriotic Bets on Chinese aI Stocks

DeepSeek's low-cost model improves hope for China AI revolution

DeepSeek stirs nationalistic fever in the middle of Sino-U.S. rivalry

AI-related stocks in China and Hong Kong surge

By Samuel Shen and Jiaxing Li

SHANGHAI/HONGKONG, Feb 6 (Reuters) - Chinese investors are rushing into AI-related stocks, historydb.date betting the expert system advance of home-grown start-up DeepSeek will cause a boom in the sector and provide the initiative to China in an intensifying Sino-U.S. technology war.

Feverish buying has actually pumped up shares of Chinese chipmakers, software application designers and data centre operators amidst patriotic calls for an upward repricing of Chinese properties as U.S. President Donald Trump recharges a trade war with fresh tariffs.

"DeepSeek's breakthrough shows Chinese engineers are innovative and efficient in creations that can contend with Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has likewise stirred nationalistic fever in capital markets."

DeepSeek surprised Silicon Valley and rocked Wall Street late last month with the announcement of a competitive large language design that was seemingly cheaper to develop than those of big-spending U.S. leaders such as OpenAI and Meta.

The occasion was explained as a watershed minute by Huaxi Securities analysts and has actually considering that seen cash gushing into AI -related stocks in mainland China and Hong Kong.

The Hang Seng AI Index has actually jumped more than 5% this week while indices tracking chipmakers and IT firms rose more than 11%, helping stable 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 vacation on Wednesday likewise piled into the tech sector, increasing shares of companies in AI, semiconductors, huge data and robotics.

"2025 will witness an explosion of AI applications," said Zhou Yingbo, head of financial investment at Futures Vessel Capital.

"We're extremely positive about opportunities developed by this transformation," Zhou said, anticipating prevalent adoption of both AI software and hardware by customers and services alike.

Likely beneficiaries include 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 advancement "has actually backfired, instead speeding up Chinese AI innovation," TF Securities said in a client note. It called for a repricing of Chinese innovation stocks which have actually underperformed U.S. peers recently in the middle of increased regulatory analysis and geopolitical stress.

The introduction of DeepSeek might prompt even tighter U.S. technology export constraints but that will only invite more federal government assistance and turbo-charge growth, the brokerage said.

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

The Wall Street bank estimates AI-enabled performance enhancement might increase earnings by 2% for Chinese equities, while brighter development prospects could result in a 20% appraisal uplift for Chinese companies, narrowing the gap with U.S. peers.

China's "difficult 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 biggest U.S. tech stocks, the so-called "Mag 7", is 31, showed 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 provider are exploring possibilities with the start-up's affordable 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" AI and tech stocks, betting large, successful business will emerge in what he called an epoch-making revolution.

However, Wang Zhuo, partner of Shanghai Zhuozhu Investment Management, was more mindful.

"Many business are still far way from creating earnings from AI ... As a value financier, I don't feel great putting money into these stocks." (Reporting by Samuel Shen and Jiaxing Li