Six weeks ago when Bonnie Chan Yiting attended the World Economic Forum (WEF) annual public in Davos, Swiss ski resorts were filled with a breakthrough app that little-known artificial intelligence (AI) startups unleashed half of the world in China.
Hangzhou-based DeepSeek launched its app of the same name on January 20 and offered its low-cost large language model (LLM) for free the same day as WEF began.
Within two days, DeepSeek has removed OpenAi’s Chatgpt as the most downloaded free software app on the iOS App Store in the United States. On Wall Street and elsewhere, DeepSeek has triggered a re-evaluation of Chinese stocks, releasing a large sum of money into the world’s second-largest capital market.
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“In the past two weeks, the world [has been] wake up [the realisation] Chen, CEO of Hong Kong Stock Exchange and Clearing Corporation, was on the Buzz Regusz Refort the Buzz Refter in Davos on February 17, and the valuations they have been based on in the past two years may need to be reviewed, especially with the arrival of DeepSeek. ”
HKEX CEO Bonnie Chan will speak at the SCMP China Conference in Kuala Lumpur on February 17. Photo: Nora Tam Alt = Hkex CEO Bonnie Chan spoke at the SCMP China Conference in Kuala Lumpur on February 17. photo
NVIDIA, the leading manufacturer of chips powered by AI applications, lost $600 billion in value when its stock fell 17% on January 27, as investors realized that LLMS could develop LLMS for a fraction of the cost when it comes to high-power computing. Since then, the stock has retreated 4%, strengthening a re-evaluation of U.S. technology stocks.
“Once you realize this [leading edge] technology [such as in AI] It can be created at a less cost and people start to wonder if the valuation allocated to the stock is reasonable. ” [investors] Will realize the attractiveness of stocks in the region. ”
Goldman Sachs was one of the first global investment banks to reevaluate Chinese stocks last month. It revised its 12-month target for the MSCI China Index, which includes stocks listed onshore and overseas, more than 13% to 85, and 2.2% to 4,700 in the largest dollar stocks in the CSI 300. This means that the levels from that time have returned 16% and 19% respectively. It added that if these goals are achieved, it would bring in $200 billion in new inflows.
Hang Seng Index is the benchmark for tracking Hong Kong’s $6 trillion stock market, with Chinese companies accounting for three-quarters of the value, and has become the best-performing stock measure worldwide this year, up 21%. The city’s index of China’s tech behemoth – from Alibaba Group to Tencent Holdings – sped over last month. Alibaba owns the position. China’s onshore market has also stabilized, with investors rushing to buy the new technology name.
After Alibaba’s co-founder Jack Ma Yun’s crackdown on the tech industry, Alibaba’s co-founder Jack Ma Yun quickly spread to the rest of the market. The gathering was largely interpreted as the formal end of the regulatory tailor and reaffirmed government support for the private sector.
“Green shots can now be seen, especially in the technology sector, with companies like DeepSeek highlighting China’s competitiveness and attractive valuations,” said Gary Dugan, CEO of Global Cio Office, an outsourcing investment service provider. “Economists are becoming more confident. Bank loans have also increased to support small and medium-sized enterprises.”
More global investment banks joined the chorus. Deutsche Bank praised Deepseek’s rise as a “moment of outbreak” for China, suggesting that the former Soviet Union launched the world’s first artificial satellite in 1957, which left the West unaware and increased the popularity of modern communist countries.
Societe Generale went as far as labelling Alibaba, Tencent, Xiaomi, BYD, Semiconductor Manufacturing International Corporation, JD.com and NetEase as the “Seven Titans” of China’s stock market, likening them to the “Magnificent Seven” of Wall Street: Nvidia, Apple, Amazon, Microsoft, Google parent Alphabet, Facebook owner Meta Platforms and Tesla.
DeepSeek’s largest shareholder is its founder Liang Wenfeng, another subset of an unlisted technology behemoth called “Fantastic Four” which also includes Byedance, drone maker DJI and human robotics Maker Maker Unitree.
As a result, a re-evaluation is in progress. According to Bloomberg, the Hang Seng Tech Index rose 35% this year, which tracks the 30 most valuable stocks in Hong Kong, increasing the amount of money earned by the gauge from 21.8 times the beginning of the year. Alibaba jumped 70% in the leap, leaping its stock to a three-year high, with its valuation from 9.3 to 16.2 times revenue, while Tencent was worth 27.3 times, recovering from a low of 18.9 after 28% of the rally.
Despite the big gains, the Seven Giants still lag behind the Seven Giant Seven with an average of 32.3 times, while Nvidia, a chipmaker at the global AI Frenzy Center, has a value of 37.6 times, with a 37.6 times.
If history is the guide, then the trade of deep life needs further development. According to Goldman Sachs, U.S. stocks have reached about 50% since Openai launched Chatgpt in November 2022, with a market cap of $13 trillion in technology alone.
Bank of America expects DeepSeek’s breakthrough could increase by 2.5% over the next decade through productivity gains, cost savings and new revenue opportunities, and the valuation gap between Chinese tech stocks will be further narrowed.
“The latest technological breakthroughs are essentially micro and innovation-driven and benefit valuation and revenue, which could make resilience more resilient than purely reselled by policy news and expectations,” Kinger Lau said in a report last month.
Investors in mainland China are buying frenzy, selling $35.9 billion in Hong Kong listed stocks this year in some of the most aggressive purchases as the country’s largest technology companies reassessment helps drive market gatherings around the world.
Onshore traders spent HK$152.8 billion (US$19.7 billion) on stocks in February through the Stock Connect program, which increased the HK$125.6 billion invested in January, according to the Hong Kong Stock Exchange. Inflows lag only behind the record-breaking HK$3100.6 billion in January 2021.
According to UBS’s global wealth management unit, China’s tech stocks will continue to outperform stocks that improve fundamentals, encourage shareholder returns and macro-policy-backed stocks, which prioritizes large companies, leading cloud platforms and semiconductor manufacturers. Swiss Bank estimates that the total market value of China’s AI industry will rise from the current US$350 billion to US$480 billion in 2028.
However, not everyone believes it. Wang Kai, a strategist at the U.S. investment firm Morningstar, said whether it depends on the monetization of LLM and the recovery of China’s consumer spending, whether the rally can be maintained.
“I’m not sure if it’s sustainable,” he said. “Many tech names are rising due to the passion for local LLMs. But that doesn’t necessarily translate into more revenue. The rally is only sustainable if these LLMs benefit directly or bring revenue to these companies.”
Nomura Holdings said China’s macro situation is cloudy and pointed to the emergence of low costs, but efficient AI applications could disrupt the job market and lead to higher unemployment. Meanwhile, geopolitical tensions are likely to remain higher in the coming months due to the Tit-Tat tariff war between the United States and China and increasing U.S. pressure on the technology front.
For Alex Au, founder and chief investment officer of Alphalex Capital Management in Hong Kong, any callback means a chance to buy the dip.
“Investors have realized that China is still able to develop its own technology with very limited resources,” he said. “This means China can continue to innovate with the United States and potentially lead the world. This will have a significant impact on foreign investors, especially in terms of confidence.”
Morgan Stanley said that due to technological innovation, inflation in China is another major problem among investors and is no longer a barrier to stocks. Wall Street Bank notes that even in Japan’s experience, companies with heavy technicians can provide higher profit margins and return equity ratios in a deflation environment.
Bank of America said that in addition to DeepSeek’s breakthrough, China has many advantages, such as a large number of engineers, data, established social networks and e-commerce ecosystems, and potential government support. It raised the MSCI China Index year-end target target by 22% to 77, while the Hang Seng Index target price increased by 24%, to 24,000.
The meaning of DeepSeek’s rise goes far beyond the stock market. After hype around AI startups, Beijing curated a high-stakes meeting with China’s leading entrepreneurs on February 17, with President XI pledging to support the private sector to appease participants including Alibaba Massachusetts.
The workshop restored investor confidence and removed one of the last remaining overhangs in Chinese stocks: policy stance on the private sector. In November 2019, the last minute of Alibaba’s affiliates, the technology company went through years of curbing, which was the last minute seat of Alibaba’s affiliates.
“DeepSeek’s macro impact on the stock market is arguably stronger than the reduction in interest rates and policy stimulus announced last year,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management in Hong Kong. “This could change the government’s perception of the role of private enterprises in the economy. After all, innovation is a key driver of productivity.”
Continuing policy measures may support index-induced gatherings. In a government work report delivered to the annual Legislative National Congress this week, China has pledged to promote industrial innovation to promote AI development by supporting wider adoption of LLMS and integrating the technology.
“This time, we expect the stock market earnings initiated by DeepSeek marks the beginning of a multi-year revaluation of Chinese stocks,” said Edith Qian, an analyst at CGS International in Hong Kong.
