In November 2022, OpenAI launched ChatGPT, a chatbot built on advanced large model technology, which rapidly captured global attention and ignited a tech boom in the U.S. stock market. Companies associated with artificial intelligence, such as NVIDIA and TSMC, saw their stock prices soar as investors flocked to capitalize on the burgeoning AI sector. Fast forward to late January 2025, just before the Lunar New Year, and DeepSeek introduced its groundbreaking model, DeepSeek-R1, shocking the world. This new arrival not only delivered a significant blow to established giants like NVIDIA but also paved the way for a bull market in Chinese assets.

The rise of the Golden Dragon Index, which tracks Chinese tech stocks listed in the U.S., exhibited remarkable gains. According to data from Futu NiuNiu, the index has been on a continuous upward trajectory since January 14, boasting a 19.47% increase by February 12, significantly outpacing the NASDAQ index during the same period. Key components such as Kingsoft Cloud and EHang Intelligent made strong strides, contributing to an overall surge in investor interest.

Similarly, the Hong Kong stock market mirrored this bullish trend. From January 14 to February 12, the Hang Seng Index rose by an impressive 15.81%, while the Hang Seng Tech Index skyrocketed by 25.09%. This remarkable performance attracted considerable attention from investors both domestically and internationally. On February 13, both the Hang Seng Index and the Hang Seng Tech Index experienced a dramatic jump. Notably, the tech index briefly surpassed its previous high from October 7 of the prior year, reaching the highest point since February 2022, although it faced some pullback by the end of the day.

Among the standout performers within the Hang Seng Tech Index were notable stocks such as Kingdee International, SMIC, Alibaba, Xpeng Motors, and Xiaomi, all witnessing significant gains. Meanwhile, the A-shares market continued its uptrend, albeit at a softer pace. The STAR Market, reflecting a higher concentration of tech companies, recorded a 12.38% increase during the same timeframe, with stocks like Qingyun Technology and UCLOUD gaining substantial traction.

The incredible success and attention garnered by DeepSeek have prompted numerous domestic and international institutions to express their optimism about Chinese assets. On February 3, Morgan Stanley highlighted during a closed-door strategy meeting that DeepSeek has shifted market expectations for the future. This includes a relevant reassessment of U.S. assets and optimistic projections surrounding the potential of China’s latecomer advantage.

Goldman Sachs, in a report released in February, noted that the emergence of DeepSeek indicates a shift in the AI industry's growth focus from hardware to software applications. This transition offers new opportunities for diversifying global markets, particularly presenting a chance for long-term value reevaluation of Chinese tech stocks.

Ma Lei, Chief Investment Officer of Invesco for mainland China and Hong Kong, stated on February 13 that DeepSeek could deliver numerous benefits, such as lowering barriers to AI adoption across various industries and enhancing efficiency. This transformation is likely to benefit many publicly listed Chinese companies and ultimately spur a revaluation of Chinese stock prices.

Moreover, China's current price-to-earnings ratio stands at 10x, 55% lower than that of the United States, while Chinese tech stocks average a 40% premium below their U.S. counterparts. When comparing H-shares and A-shares, H-shares exhibit greater attractiveness regarding valuation.

Recent reports from Deutsche Bank revealed that following the genesis of DeepSeek, the recognition of Chinese intellectual property is gaining momentum, with China's leadership in high-value sectors and its supply chain dominance expanding at an unprecedented pace. They further emphasized that by 2025, the potential competitive advantage of Chinese firms should capture the attention of the global investment community. Within manufacturing and an increasing array of services, Chinese companies are capable of delivering higher quality products at better prices.

Bank of America noted that just as Alibaba's IPO in 2014 sparked the rise of China’s “new economy” and drew global long-term capital flows, DeepSeek could represent a similar pivotal moment for the current Chinese stock market. The so-called “holy grail” of AI development in China may not reside in having the best product, but rather in producing a solution that is "good enough" to enable widespread AI applications and drive productivity and economic growth.

Amidst the growing enthusiasm for DeepSeek, capital has actively flowed into Chinese assets, with reports indicating that many global hedge funds significantly increased their investments in Chinese stocks throughout this year. As the global capital market converges around a “DeepSeek consensus,” the influx of funds has seen an explosive growth.

As noted by Goldman Sachs, data up to February 7 indicated that Chinese onshore and offshore stocks collectively accounted for the most substantial nominal net buying volume across their global prime brokerage business this year. Investors, such as Taosha Wang of Fidelity, mentioned that Fidelity International had ramped up their Chinese stock holdings, granting them an overweight rating.

Analysts from CICC posited that the launch of the DeepSeek-R1 model sparks considerable enthusiasm within the technology sectors, with information technology, consumer discretionary, and media & entertainment heavily influenced by AI emerging as key drivers of the market's rise.

In specific tech sub-sectors such as semiconductors, AI, and robotics, substantial policy support is bolstering continued breakthroughs. Such advancements not only stimulate the growth of related sectors but also might engage global investors in reallocating Chinese assets, thereby enhancing investment value in tech stocks.

HSBC’s Chief Investment Officer for China, Kuang Zheng, expressed confidence in domestic application developers who can effectively bring real-world AI solutions, specifically emphasizing tools and software across critical and general management industries.

Goldman Sachs flagged a potential 20% return for Chinese tech stocks after reevaluation by 2025, with soft tech stocks projected to lead the market, while overall growth for Chinese equities could reach as high as 7%. In summary, with the introduction of the DeepSeek-R1 model, optimism surrounding China’s tech industry is prevalent, suggesting that this may trigger a significant boost in asset valuations for Chinese equities, particularly impacting U.S.-listed Chinese stocks and both the Hong Kong and A-shares markets. However, given that many companies have already seen substantial short-term gains, investors should remain alert to potential risks associated with chasing the market’s peaks in the near term.