Wall Street, UBS see upside for Chinese AI stocks with rally at less than halfway mark

Name: Chinese AI disrupter DeepSeek claims top spot in US App Store, dethroning ChatGPT
Uploaded: 2025-02-12T09:39:09.000Z
Duration: 5 min 10 s
Description: Chinese AI disrupter DeepSeek claims top spot in US App Store, dethroning ChatGPT

Both the MSCI China Index and the Hang Seng Index have troughed and foreign long-only investors still have room to catch up: Morgan Stanley

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Yulu Ao

Published: 5:39pm, 12 Feb 2025Updated: 6:22pm, 12 Feb 2025

US investment banks are cheering Chinese technology stocks again, taking the cue from investors who have been piling into them over the past month after start-up DeepSeek fuelled a bull-market rally with its cost-busting artificial intelligence (AI) chatbot.

Morgan Stanley called the DeepSeek breakthrough “the biggest catalyst” behind the market rally, while Goldman Sachs said China offers the best soft-tech play in Asia in terms of exposure to earnings and market capitalisation. JPMorgan Chase said AI applications, rather than infrastructure, will drive the next wave of value creation, a shift that may be particularly advantageous for China.

“Global investors are starting to reassess China’s investability within the tech and AI space, after an extended period of limited attention,” Morgan Stanley strategists Laura Wang and Chloe Liu said in a report on Tuesday. “We expect the momentum to sustain in the near-term given global investors’ light positioning.”

05:10

Chinese AI disrupter DeepSeek claims top spot in US App Store, dethroning ChatGPT

The MSCI China Index, a gauge tracking Chinese stocks listed at home and abroad, has risen 15 per cent this year, while the MSCI China IT Index jumped 24 per cent. The Hang Seng Tech Index has risen more than 20 per cent in Hong Kong since DeepSeek unveiled its R1 large language model, sending the nation’s biggest tech stocks into a technical bull market.

The 581 members of the MSCI China Index have gained US$224 billion in market value since recovering from a January low. The S&P 500 Index, whose biggest members include the “Magnificent Seven” tech giants, has lost more than US$1 trillion in the DeepSeek-induced sell-off. David Tepper, the billionaire founder of hedge fund Appaloosa Management, is among the beneficiaries with his “buy everything China” call last year.

Appaloosa boosted its positions in US-listed shares of JD.com by 43 per cent, Alibaba by 18 per cent, Baidu by 7 per cent, KE Holdings by 18 per cent, and PDD by 1 per cent in the fourth quarter of 2024, according to its 13F filing on Monday. Holdings in China-focused exchange-traded funds also increased.

06:57

Boom or bust: how sustainable is China’s stock frenzy?

Mainland Chinese funds are also setting themselves up for a big payoff, having ploughed HK$138 billion (US$17.7 billion) into Hong Kong-listed stocks this year through February 11, according to stock exchange data. This was in addition to a record HK$807.9 billion buying spree last year.