Since the beginning of this year, Chinese tech stocks have been in the spotlight, powered by the AI wave initiated by DeepSeek. This breakthrough is being hailed as China’s “Sputnik moment” in the realm of artificial intelligence (AI), reminiscent of the 1957 event when the Soviet Union launched Sputnik 1, the first artificial satellite, signaling its lead in space technology and intensifying the competitive edge against the United States. According to Morgan Stanley, the launch of DeepSeek epitomizes a significant shift for China, evolving from a “technological follower” to a “rule-maker” in the global tech landscape.

In February 2025, fueled by DeepSeek's momentum, the A-share market experienced a robust performance, with the Shanghai Composite Index rising by over 4%, the Shenzhen Component Index by more than 8%, and the ChiNext Index soaring above 9%. The Hong Kong stock market mirrored this enthusiasm, as the Hang Seng Index surged by more than 15%, and the Hang Seng Tech Index skyrocketed by over 20%, significantly lifting the stock prices of major Chinese tech players like Alibaba, Tencent, and BYD. This resurgence in share prices has been dubbed a “tech stock revaluation wave,” driven mainly by breakthroughs in AI technologies like DeepSeek, which prompted investors to re-evaluate the long-term potential of Chinese tech firms. Historically, these stocks have been subject to a “valuation discount” in global capital markets.

In an exclusive interview with Tianfeng Securities’ co-director of Global Forward Industry Research Institute, Kong Rong, she emphasized that this is not merely a fleeting market hype but a fundamental turnaround in international perceptions regarding Chinese technology, thus boosting companies' confidence in their investment in automation and innovation. “More importantly, this may initiate a new cycle of innovation in China,” she expressed.

Notably, the tech giants stand to gain the most from this AI wave. According to Kong, these giants possess longstanding technological foundations, extensive user data, and diverse product ecosystems, positioning them well to capitalize on this AI opportunity. Currently, fervent activity can be observed among major companies like Tencent, Alibaba, and Baidu, as they actively integrate their services with DeepSeek. In a significant move, Alibaba announced plans to invest over 380 billion yuan in cloud and AI infrastructure over the next three years, signaling rapid advancements in the tech sector.

The AI revolution sparked by DeepSeek is compelling global investors to reassess Chinese technological capabilities and the inherent value of Chinese assets. This scenario resonates with the dramatic rise of AI in the U.S., particularly following the emergence of ChatGPT in 2023, which prompted significant valuation adjustments in American tech stocks — collectively dubbed the “FANG” stocks (Facebook, Amazon, Netflix, Google). The market witnessed a substantial uplift in everything from hardware to software, igniting widespread investor enthusiasm across the entire AI value chain.

For instance, Nvidia established itself as a pivotal player in the AI computation landscape, with its stock price increasing by over eight times in just two years, and application-focused firms like Palantir and Applovin saw their stock soar by over tenfold, all due to AI’s transformative impact.

Kong remarked that for many years, the American tech industry has flourished, fundamentally supported by global capital recognizing its strength. The growth of the American tech landscape has been viewed as a crucial component of national power, further accelerated by the emergence of technologies such as GPT. In contrast, China’s AI sector has not historically enjoyed the same level of international recognition. While China has seen developments in models like Kimi and Doubao, they have not yet ascended to the leading tier of AI models, often overlooked in international model evaluations.

Nevertheless, DeepSeek's emergence is reshaping this narrative. It has showcased superior performance in international model evaluations, securing a spot among the top tier of global AI models, and its app has soared to the top of free software charts worldwide. Industry analysts suggest this recognition enhances international investor interest toward Chinese technological innovation.

This pivotal development boosts the prospects for AI applications and their real-world implementation in China. According to Kong, previously, AI applications struggled to gain traction due to inadequate model capabilities, resulting in a lack of acknowledgment for the logic of industrial upgrades, which in turn limited valuations. With breakthroughs from DeepSeek and similar technologies, the pace of AI application implementations in China is accelerating.

She forecasts a significant acceleration in industrial upgrades and digitization as AI applications begin to take root. The support from market-oriented investment firms and a reliable exit strategy will play key roles in continual capital flow and the strength of the capital market.

From an investment perspective, Chinese assets are unlocking future growth potential, compelling international capital to expedite the revaluation of Chinese assets, with foreign investors increasingly optimistic about the outlook for the Chinese tech sector. Goldman Sachs projects that the proliferation of AI will drive a 2.5% annual increase in corporate profits for Chinese stocks over the next decade, while Morgan Stanley anticipates an average annual return of 7.8% for Chinese stocks over the next 10 to 15 years.

Such sweeping transformations in the digital realm pose significant opportunities for major players in the tech landscape. According to Alibaba’s CEO, Joe Tsai, the surge of DeepSeek has turned the focus from funneling hundreds of billions into computational infrastructure toward addressing real-world challenges through AI solutions.

As foundational model capabilities evolve, the barriers to application development are diminishing, prompting industries like education, finance, e-commerce, and advertising, which have immense market sizes and strong demands for AI applications, to explore viable deployment options. Kong noted, “Cloud providers and infrastructure suppliers are likely to be among the first beneficiaries of the AI wave unleashed by DeepSeek. Regardless of how applications evolve, cloud infrastructure remains essential for supporting varied applications, and its demand will continue to expand with technological advancements.”

Moreover, as DeepSeek gets integrated into various services, the significance of cloud services in AI applications becomes increasingly pronounced. Large enterprise players, benefiting from their strategic positioning and resource advantages in cloud computing, are set to see their valuations rise due to this wave.

Alibaba exemplifies this trend, announcing a record investment of over 380 billion yuan over the next few years in cloud and AI infrastructure, surpassing the aggregated total of the past decade. On February 24, Morgan Stanley released a report increasing Alibaba’s target price from $100 to $180 and raising its rating from ‘Market Perform’ to ‘Overweight,’ suggesting that the market traditionally underestimated Alibaba’s growth potential in AI-driven cloud computing.

Apart from infrastructure, there’s a burgeoning boom in various AI applications, with industry insiders predicting 2025 to be the breakout year for AI end-user applications. In practice, firms are increasingly focusing on practical deployments of AI technologies rather than being limited to mere conceptual discussions. Business scenarios that can genuinely demonstrate the value of AI are likely to yield significant valuation premiums.

Within this evolving landscape, major companies capable of swiftly adopting AI technologies will reap substantial benefits. Kong stated that major firms typically possess vast reservoirs of user data and rich product ecosystems, positioning them favorably for breakthroughs in AI applications.

In fact, several large corporations have already smartly integrated DeepSeek into their systems: Tencent’s WeChat, QQ Music, and its document services have all jumped on board, along with Baidu's AI search adopting the full version of DeepSeek-R1. Alibaba has also integrated DeepSeek across multiple divisions including cloud services, 1688, and Tmall Genie.

Kong identifies three main advantages of DeepSeek integration for large firms: first, improved user retention; second, dominance over entry points; and third, enhanced commercialization pathways. “Utilizing their products to attract this influx of e-commerce traffic is a highly cost-effective strategy for major players,” she said, underscoring her findings from recent consultations with numerous companies about the notable effects observable in scenarios aligned with DeepSeek.

As for whether they will continue on the path of self-generated large models, Kong expressed that large firms generally adopt a dual-focused approach: enhancing applications utilizing external AI technologies while also advancing their proprietary AI models. “The central aim for these enterprises is to maintain an edge in traffic entry points and deliver quality user experiences to foster user loyalty.”

In this fast-paced competitive environment, the AI race is accelerating, and companies face a narrowing window of opportunity. As such, Kong emphasized the need for swift decision-making, triggering an increased urgency in in-house R&D across major tech firms.