DeepSeek Leads the AI Wave, Institutions Bullish on the Chinese Stock Market
In 2025, the AI technology field reached a significant milestone with the rise of DeepSeek. As a low-cost, high-performance, and open-source AI platform, DeepSeek quickly gained a foothold in the global AI market through its innovative technology. Its core technology drastically reduced inference costs and effectively enhanced the commercial viability of AI applications.
According to the latest data released by DeepSeek, its inference costs are about 60% lower than GPT-4, and the processing speed for each inference has improved by over 50%. This technological breakthrough has made AI applications not just for large enterprises but also widely accessible to small and medium-sized businesses and emerging industries.
Positive Market Response: Investors Bullish on Chinese Stocks
DeepSeek's technological breakthrough has had an immediate impact on Chinese tech stocks. Several international investment banks have raised their forecasts for Chinese stocks, expecting Chinese tech companies to play an increasingly important role in the global AI market.
Goldman Sachs recently released a research report with a positive outlook on Chinese tech stocks. Their analysis suggests that the MSCI China Index has a 14% upside potential under neutral conditions and a 28% increase in an optimistic scenario. Goldman Sachs pointed out that as Chinese companies expand in high-value sectors like AI, big data, and cloud computing, they will become more prominent in the global tech industry. The report also highlighted that AI applications drive Chinese tech stocks, and investors should pay attention to Chinese companies' strategies in AI, large models, and SaaS services.
Also, software technology makes up 37% of earnings and 32% of market value in the MSCI China Index. Right now, Chinese software tech companies are undervalued, about 1.5 standard deviations below their long-term average, suggesting they have room for value growth. Goldman Sachs advises investing more in the internet, media, and entertainment sectors, as these industries could benefit from the rise of AI.
Goldman Sachs' research report shows that with the widespread adoption of AI technology, the valuations of Chinese AI-related companies are expected to increase by 30% to 50%. As cloud computing and AI continue to converge, business models and market valuations are also changing. According to Deutsche Bank's analysis, valuations in the cloud computing and AI integration sector are expected to grow by 20% to 30%, with companies like $Kingsoft Cloud Holdings Ltd(KC)$
Deutsche Bank also released a similar optimistic report, particularly highlighting that DeepSeek's rise is a "Sputnik moment" for China's tech industry. Deutsche Bank believes that DeepSeek's technological breakthrough marks the accelerated rise of Chinese tech companies to a dominant position in the global supply chain, especially in high-value tech sectors.
This trend is expected to significantly impact the overall valuation of Chinese stocks, shifting them from their current "valuation discount" to a more favorable premium status. Deutsche Bank further noted that Chinese stocks have strong earnings growth potential in the coming years, particularly in artificial intelligence and cloud computing.
Besides the above financial institutions, BlackRock is optimistic about the Chinese market. Wang Xiaojing, the director of multi-asset and quantitative investments at BlackRock, said they are positive about China's market in the next 12 to 36 months, particularly in Chinese stocks and interest-rate bonds.
Policy Support and Market Outlook
Since 2025, some foreign funds have started investing more in Chinese assets. By January 30, 2025, global equity funds in China totaled $3.33 billion, up from $2.75 billion in December 2024, showing an increase. Most of the money in January came from passive ETFs, which saw $4.03 billion in inflows, compared to $3.60 billion in December.
In addition to technological innovation, policy support has been a key factor driving the strength of Chinese tech stocks. Since September 2024, the Chinese government has implemented expansionary fiscal policies, leading to a strong market rebound. According to Goldman Sachs' analysis, the Chinese stock market's price-to-earnings (PE) ratio has increased from 12 times at the end of 2023 to 14 times currently, with this trend expected to continue into 2025.
Goldman Sachs also noted that policy support is not only reflected in infrastructure and corporate assistance but also in tax reductions and innovation incentives that help ease the burden on tech companies, particularly in high-tech sectors like AI.
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