(Bloomberg) — China’s growing clout in the artificial intelligence space has sparked a wave of optimism toward the nation’s tech shares, with a gauge entering a bull market and brokers issuing upbeat calls.
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The Hang Seng Tech Index climbed 1.8% on Friday to take its gains from a January low to over 20%. Xiaomi Corp. and Alibaba Group Holding Ltd., which have the biggest weighting on the gauge, each rallied almost 30% during that period. Both are viewed as beneficiaries of AI advancement.
Chinese startup DeepSeek’s AI model is being hailed as a game-changer for the tech industry, highlighting the nation’s innovative capabilities. It’s also prompting a broader re-evaluation of the nation’s beaten-down shares, just as the market was caught in the crosshairs of a tariff war following Donald Trump’s return to the White House.
“This is a sector that has been ignored but like other purely domestic sectors, there are some bright spots,” said Sat Duhra, portfolio manager at Janus Henderson Investors in Singapore. “The recent DeepSeek announcement is a timely reminder that behind the scenes, industrial policy — for example Made in China 2025 — has pushed many sectors toward world-class status.”
Alibaba’s shares have also been buoyed by the company’s assessment that its new AI model scored better than Meta Platforms’ Llama and DeepSeek’s V3 in various tests.
It’s a rare moment of victory led by the private sector, after the Chinese market has been bogged down for years by government regulations and policy uncertainties. Wall Street brokers are upbeat, arguing that the Chinese discount will vanish as gauges top prior highs due to manufacturing strength and tech competence.
DeepSeek emerged as a formidable challenger to global AI leaders after it unveiled an app developed at a fraction of the cost that rivals spent to build their products, even amid curbs on imports of the most cutting-edge chips to China.
“We think 2025 is the year the investing world realizes China is outcompeting the rest of the world,” Deutsche Bank analyst Peter Milliken wrote in a Feb. 5 report entitled “China Eats The World.” The note went viral on the Chinese internet search engine, with the local investment community applauding the upbeat comments.