Chinese tech stocks surge as DeepSeek’s AI breakthrough boosts investor confidence: Financial Times

DeepSeek’s AI breakthrough has sparked a 25% surge in Chinese tech stocks, boosting investor confidence and putting China’s AI sector in direct competition with US tech giants, Financial Times reports.

Chinese technology stocks have entered a bull market, with the Hang Seng Tech Index rising more than 25% in the past month. The surge follows a major artificial intelligence breakthrough by DeepSeek, a Chinese AI company that developed a large language model (LLM) using significantly less computing power than its American counterparts. The development has renewed global investor confidence in China’s tech sector, even as the country faces economic challenges and US trade pressures, Financial Times reports.

DeepSeek’s AI innovation sparks market optimism

In late January, DeepSeek stunned the AI industry by revealing that it had built an advanced LLM without the massive computational infrastructure typically required for such projects. The announcement challenged the prevailing belief that AI progress is solely dependent on high-cost investments and cutting-edge hardware, prompting a reassessment of China’s technological capabilities.

The news had an immediate effect on global markets. US tech stocks, which have long dominated AI development, saw sharp declines, with Nvidia experiencing a historic $589 billion market loss in a single day. Meanwhile, Chinese tech stocks soared as investors shifted focus to companies that could benefit from domestic AI advancements. The rally has been led by major firms in cloud computing, consumer electronics, and AI-driven technologies.

Tech giants lead the rally

Alibaba’s stock jumped 43% in the past month, fuelled by reports that the company is working with Apple to introduce AI features tailored for the Chinese market. Xiaomi surged 34%, benefiting from strong consumer demand and AI integration in its devices. Baidu, one of China’s largest search engine companies, saw its stock rise by 13%, driven by AI-led innovations.

The broader Hang Seng Index has also gained 15% over the past month, while mainland China’s CSI 300 index remains up only 4% in the same period. The gains mark a significant turnaround for Chinese tech stocks, which had struggled in recent months amid economic uncertainty.
Foreign investors return amid economic uncertainty

The resurgence in Chinese tech stocks is a welcome development for investors who had previously pulled back due to concerns over US President Donald Trump’s tariffs, a sluggish property market, and deflationary pressures in the Chinese economy. The increased interest is also reflected in capital flows into Hong Kong. Data from Stock Connect, a trading program that enables mainland Chinese investors to buy Hong Kong-listed stocks, shows that February’s average daily turnover was two-thirds higher than January and three times higher than February 2024.

The surge in investor confidence highlights a growing belief that China’s AI development is advancing rapidly, particularly in the mass adoption and commercialization of AI technologies. While American firms have led the way in pioneering AI innovation, Chinese companies are proving adept at scaling and applying AI solutions across industries.

China’s AI strength vs US innovation

Bush Chu, an investment manager for Chinese equities at Abrdn, pointed out that while US firms have been strong in “zero-to-one innovation,” China has excelled in “one-to-100 innovation,” meaning it is particularly effective at mass adoption and integration of new technologies. Analysts at Citi echoed this sentiment, noting that investors may have underestimated the AI potential of China’s internet giants, which are now positioned to benefit from AI-driven market shifts.

Looking ahead

While DeepSeek’s breakthrough has revived optimism, long-term growth will depend on continued policy support, stable global market conditions, and further advancements in AI and digital infrastructure. Despite ongoing geopolitical and economic challenges, the latest developments indicate that China’s tech sector is once again becoming a major player in global AI innovation, Financial Times reports.