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DeepSeek's low-cost model increases expect China AI transformation

DeepSeek stirs nationalistic fever amid 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 financiers are rushing into AI-related stocks, wagering the synthetic intelligence advance of home-grown startup DeepSeek will cause a boom in the sector and give the effort to China in an intensifying Sino-U.S. innovation war.

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

"DeepSeek's advancement reveals Chinese engineers are creative and capable of creations that can compete with Silicon Valley," said China Europe Capital Chairman Abraham Zhang. "It has also stirred nationalistic fever in capital markets."

DeepSeek stunned Silicon Valley and rocked Wall Street late last month with the statement of a competitive big language design that was ostensibly more affordable to establish than those of big-spending U.S. leaders such as OpenAI and pl.velo.wiki Meta.

The event was explained as a watershed moment by Huaxi Securities experts and asteroidsathome.net has because seen money gushing into AI-related stocks in mainland China and Hong Kong.

The Hang Seng AI Index has jumped more than 5% today while indices tracking chipmakers and IT companies surged more than 11%, assisting constant the Hong Kong market as the U.S. included a 10% tariff to Chinese imports.

On the mainland, investors returning from a week-long Lunar New Year holiday on Wednesday likewise piled into the tech sector, enhancing shares of companies in AI, botdb.win semiconductors, big data and robotics.

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

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

Likely recipients consist of 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, instead accelerating Chinese AI innovation," TF Securities said in a client note. It called for a repricing of Chinese innovation stocks which have underperformed U.S. peers over the last few years amidst increased regulative scrutiny and geopolitical stress.

The development of DeepSeek could trigger even tighter U.S. technology export constraints however that will only welcome more federal government assistance and turbo-charge growth, the brokerage said.

Goldman Sachs expects Chinese advancements in AI advancement and application "might materially change" the stock exchange trajectory.

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

China's "tough tech" stocks trade at a rate representing 23.6 times incomes, iuridictum.pecina.cz 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, revealed the Goldman report dated Feb 4.

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

Yi Xiangjun, of Shenzhen Black Stone Asset Management, wiki.snooze-hotelsoftware.de said he is "all in" China's AI and tech stocks, wagering large, successful companies will emerge in what he called an epoch-making revolution.

However, humanlove.stream Wang Zhuo, valetinowiki.racing partner of Shanghai Zhuozhu Investment Management, was more careful.

"Many companies are still far method from producing profit from AI ... As a value investor, I do not feel great putting cash into these stocks." (Reporting by Samuel Shen and Jiaxing Li; Editing by Vidya Ranganathan and Christopher Cushing)