Deepseek’s AI model integration into Weixin increased Tencent’s stock on Monday. Gaming of huge Tencent profits in Alibaba and Baidu stocks last week was recently repeated violently behind the hype with Deepseek’s cost-effective AI models.
Chinese artificial intelligence startup Deepseek continues to burn the country’s tech stocks.
Hong Kong’s Hang Centech Index has highlighted the strong profits of Chinese tech companies by around 25% so far this year. Meanwhile, the broader Hangsen index is about 13% higher this year.
China’s tech stock enthusiasm has prompted questions about whether rallies are sustainable given the prolonged economic recession in China. The offensive stimulus blitz in September prompted a surge in Chinese stock markets, but it flares up in a few weeks.
But this could be different this time, Goldman Sachs analyst wrote in a note Monday. Deepseek R-1 – The latest flagship model of the AI company, considered globally competitive and cost-effective, “changed the narrative” of Chinese technology, they write.
Beijing’s September policy pivot reduced the downside of stocks, but the recent technology breakthrough has been better in valuation and revenue.
It “may give the recovery more staying power than what was purely driven by a relicate of policy news and expectations,” the analyst wrote.
The recent rally is a reversal of the good fortune of Chinese tech companies. In recent years, businesses have been hit by crackdowns on Beijing’s big technology, but now they seem to be posting large profits in turn. Last week it was Alibaba and Baidu.
On Monday, it was the turn of the game giant Tencent. The stock has risen to nearly 8% since 2021 (to the highest level since 2021) after confirming it has integrated Deepseek’s AI model into the Weixin Super App. Stock rose 4% in Hong Kong.
Analysts at Goldman Sachs write that Chinese companies can boost revenue from three key AI-driven areas: increased productivity, reduced costs and new revenue opportunities. Increased confidence could also increase the fair value of Chinese stocks by 15% or 20%.
Analysts write that the technology could attract $200 billion in net purchases for Chinese stocks.
Despite optimism, Goldman Sachs analysts highlighted risks to current gatherings, including issues such as data privacy, industry regulations, strengthened Western export controls and China’s wider economy.
“As AI could be promising and strategically important for China’s long-term growth outlook, strong policy offerings, particularly fiscal stimulus, are needed to alleviate immediate tariff headwinds. I emphasize that,” they write. Challenges include increasing domestic demand and overcoming an expansion spiral.
