DeepSeek is Leading Industry Transformation and the Market is Re-evaluating Chinese AI Assets

The impact of DeepSeek on the global AI industry has become a topic that US tech companies couldn't avoid when releasing their financial reports this week.

After the US stock market closed on February 5th, local time, Qualcomm and Arm released their fourth-quarter 2024 financial reports, with both revenue and profit exceeding market expectations.

Executives from both companies discussed the impact of DeepSeek on the entire industry during the post-earnings conference calls, stating that it will further drive the penetration of AI across all industries.

Tech Giants Conduct a Comprehensive Assessment of the Impact of DeepSeek

Cristiano Amon, the CEO of Qualcomm, said during the post-earnings conference call that the launch of DeepSeek-R1 is a turning point in the AI industry.

The pre-training of large AI models will continue in the cloud, and inference will shift towards the edge side.

Amon believes that AI models will become smaller, more efficient, and more customized in the future.

Vertical AI models and AI applications tailored to different needs will emerge at an accelerated pace, and the penetration rate of AI will be higher. "Qualcomm will benefit from this industry change. We have already adapted DeepSeek on mobile phones and computers equipped with Snapdragon chips."

Arm, a leading chip-design company, said during the post-earnings conference call that DeepSeek has made many innovations based on other large models, improved the efficiency of inference, promoted the diversification of AI application scenarios, and the demand for computing power continues to grow.

Arm stated that edge-side devices (such as smartphones, smart homes, and in-vehicle computing) are usually limited by power consumption and heat dissipation and cannot use high-power-consumption computing chips.

The optimization of DeepSeek helps to reduce computing costs and power consumption, giving ARM-architecture chips an advantage in edge-side inference tasks.

Before Arm and Qualcomm made their statements, Google, Microsoft, and Apple had also expressed optimism about the future development of the industry driven by DeepSeek.

Tim Cook, the CEO of Apple, believes that DeepSeek's artificial intelligence model represents "innovation that drives efficiency."

Satya Nadella, the chairman and CEO of Microsoft, said that there are real innovations in the DeepSeek-R1 model, and the efficiency in AI training and inference is significantly improving, further confirming the trend of declining AI costs.

Sundar Pichai, the CEO of Google, said that the emergence of more cost-effective large AI models globally will further drive the adoption rate of this technology, which is beneficial to the development of Google and the entire industry.

In the future, Google will also further seek to reduce the cost per query, and 2025 will be one of the years with the largest amplitude of search innovation so far.

The Market Re-evaluates Chinese AI Assets

At the same time, due to the popularity of DeepSeek, the narrative of China's artificial intelligence has been upgraded. Global financial institutions have increased their attention to Chinese assets, including Chinese artificial-intelligence companies.

Data from Goldman Sachs, an international investment bank, and EPFR, a global fund flow and asset-allocation data provider, both show that before the Spring Festival, Chinese assets once again attracted capital inflows overseas.

Some institutions also said that the sudden emergence of DeepSeek is expected to make the market re-evaluate Chinese AI assets.

Primeview International Securities said that DeepSeek has brought changes to the path of large AI language models, that is, no longer relying solely on "stacking computing power," but achieving better results by optimizing algorithms, which is expected to accelerate the development process of AI.

In the short term, it is expected that the valuation gap between the AI industries in China and the US will narrow.

"At the market level, the Deepseek effect is reshaping the global competition pattern of AI, triggering investors' concerns about the valuation of US tech stocks. There is a certain'seesaw' effect between the pro-cyclical and tech sectors in the US stock market, and the valuations of Chinese and US tech companies may converge." Huatai Securities analyzed that at the strategic level, the development of Deepseek is catalyzing the re-evaluation of the value of Chinese and US tech stocks, and the further development of AI has risen to the national-strategy level.

On January 29th, the ETF KWEB, which tracks the China Overseas Internet Index, recorded a net inflow of $105 million.

After several months, KWEB once again received a significant net capital inflow.

KWEB tracks the China Internet Index. The top ten heavily-weighted stocks of this index include Tencent Holdings, Alibaba, Pinduoduo, Meituan, Ctrip, NetEase, JD.com, BOSS Zhipin (Kanzhun Technology), Baidu, and Manbang.

Among the top ten heavily-weighted stocks of the index tracked by KWEB, there is a high proportion of internet and tech stocks.

Many institutions have given optimistic ratings to Chinese internet and tech stocks, including Alibaba.

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For example, on January 21st, Joyce Ju, an analyst at Bank of America, raised the target price of Alibaba's stock and maintained a buy rating.$BABA $NTES $PDD $YMM $BIDU $BZ