Shares of Chinese chipmakers, software developers, and data center companies have surged as patriotic sentiments push for a reevaluation of Chinese assets, especially with U.S. President Donald Trump reigniting a trade war through new tariffs.
“DeepSeek’s breakthrough shows Chinese engineers are creative and capable of inventions that can compete with Silicon Valley,” remarked Abraham Zhang, Chairman of China Europe Capital. “It has also stirred nationalistic fever in capital markets.”
DeepSeek made waves in Silicon Valley and Wall Street last month by unveiling a competitive large language model that was reportedly less expensive to develop than those from major U.S. players like OpenAI and Meta.
Analysts at Huaxi Securities called this a pivotal moment, leading to a flood of investment into AI-related stocks in both mainland China and Hong Kong. The Hang Seng AI Index rose over 5% this week, while indices for chipmakers and IT companies jumped more than 11%, providing stability to the Hong Kong market as the U.S. imposed a 10% tariff on Chinese imports.
On the mainland, investors returning from the Lunar New Year holiday on Wednesday also flocked to the tech sector, driving up shares in AI, semiconductors, big data, and robotics.
In 2025, we’re going to see a huge surge in AI applications, according to Zhou Yingbo, who leads investments at Futures Vessel Capital. He’s really excited about the opportunities this revolution will bring, anticipating that both consumers and businesses will widely adopt AI hardware and software.
Huaxi Securities pointed out that companies like Nancal Technology, Suzhou MedicalSystem Technology, Doctorglasses Chain, Bestechnic Shanghai, and Ucap Cloud Information Technology are likely to benefit from this trend. They also noted that the U.S. efforts to curb China’s tech progress have backfired, actually speeding up AI innovation in China. TF Securities suggested that it might be time to reevaluate Chinese tech stocks, which have lagged behind their U.S. counterparts due to regulatory challenges and geopolitical issues.
The rise of DeepSeek could lead to stricter U.S. tech export rules, but that might just encourage more government backing and boost growth, according to the brokerage. Goldman Sachs believes that breakthroughs in AI in China could significantly change the stock market landscape. They estimate that AI-driven efficiency could lift earnings for Chinese stocks by 2%, and better growth prospects might increase valuations by 20%, helping to close the gap with U.S. companies.
Currently, China’s “hard tech” stocks are trading at a price-to-earnings ratio of 23.6, while “soft tech” stocks are at 13.9. In comparison, the top U.S. tech stocks, known as the “Mag 7,” have a P/E ratio of 31, as per a Goldman report from February 4. DeepSeek has generated so much interest that various Chinese firms, from chipmakers to cloud service providers, are looking into its affordable services, including major players like Huawei, Alibaba, and Baidu.
Yi Xiangjun, a partner at Shenzhen Black Stone Asset Management, mentioned he’s fully invested in China’s AI and tech stocks, betting big on their future.
“Many companies are still far way from generating profit from AI… As a value investor, I don’t feel confident putting money into these stocks.”
