In a remarkable turn of events in early February 2023, the three major telecommunications operators in China—China Telecom, China Unicom, and China Mobile—experienced a significant surge in their stock prices. On February 10, these companies witnessed a collective rise in their shares, with China Telecom hitting a ceiling price, which marked a record high for its stock. China Unicom followed closely with an impressive peak increase of over 7.8%, while China Mobile's stock also showed a substantial rise of approximately 4.6%. By the end of the trading day, China Telecom had recorded a 6.59% increase, China Unicom rose by 4.4%, and China Mobile saw a growth of 1.72%. This positive momentum in the stock market can be traced back to a critical announcement made on February 8, when the Ministry of Industry and Information Technology in China highlighted the full integration of the 'DeepSeek' open-source large model by the three major telecom companies. This integration aims to enable the application of this cutting-edge technology across multiple scenarios and product offerings, specifically catering to the popular DeepSeek-R1 model through a comprehensive computing capability scheme designed to enhance the performance of domestic large models.

The surge in stock prices reflects a broader sentiment among investors who believe that these telecom giants possess unparalleled advantages in data resources and network infrastructure. This belief is rooted in the notion that their deep integration with DeepSeek and similar AI technologies could pave the way for new revenue streams, ultimately bolstering the companies' profitability and market value. This optimistic outlook is indeed materializing as evidenced by the rising stock prices.

DeepSeek has recently gained immense popularity in the tech world, with its success captivating the entire AI industry chain. Given that telecom operators are closely linked to digital information transmission and data center resources, there are great expectations from the market regarding their involvement with DeepSeek. China Telecom, for instance, has leveraged its self-developed Tianyi Cloud to introduce the 'Xirang' intelligent computing platform, marking a groundbreaking achievement in aligning native computing power with the DeepSeek-R1 and V3 series large models. This positions China Telecom as the first domestic operator to realize the rollout of an all-stack localized inference service through their cloud platform.

Meanwhile, China Mobile’s subsidiary service, Mobile Cloud, has integrated the DeepSeek model thoroughly, achieving “full version coverage, all size adaptation, and functional implementation.” With a network of 13 intelligent computing centers encompassing the whole nation, they offer flexible deployment options. Users are afforded the capability to select any intelligent computing resource pool for operations such as deployment, distillation, and intelligent agent orchestration.

In a similar vein, China Unicom has used its Xingluo platform to facilitate the adaptation of the DeepSeek-R1 model across multiple specifications, accommodating both privatized and public scenarios. This technology is pre-deployed across over 270 backbone cloud pools, allowing seamless integration into various products like Unicom Cloud Desktop and programming assistants. The partnership between the three main telecom operators and DeepSeek signifies not only a technological fit but also an innovative commercial venture into unchartered territories.

As the AI industry revolutionizes traditional sectors, the roles of telecom operators are evolving rapidly. No longer just passive conduits for communication, these operators are transforming into architects of smart service ecosystems. The advent of DeepSeek propels this transformation by accelerating the shift from traditional telecommunication models towards smarter and more integrated service offerings.

With the growth of traditional communication services slowing to single digits, the urgency of integrating AI transformation into their operations has become a crucial challenge for survival. The three major telecom operators now find themselves at the brink of a re-evaluation of their market value. Reportedly, CITIC Securities has noted that the announcement of full-access integration with DeepSeek by these operators positions them favorably for expediting cloud computing revenue growth.

Moreover, Huatai Securities has indicated that under the leadership of DeepSeek, the depth and breadth of AI application outreach are poised for substantial advancement, generating robust demand for connectivity and inference applications. This transformation promises to benefit the telecom operators by capitalizing on their unique strengths in the integration of networks, cloud computing, and end-user services.

Firstly, the demand for network traffic is expected to grow significantly as AI applications proliferate, reinvigorating growth in data communication services. Secondly, the market shares of the three operators in domestic cloud and data center industries are leading, suggesting dual enhancements in growth potential and profitability. Additionally, AI's potential to expand connectivity from "person-to-person" to "thing-to-thing" is a game changer for operational dynamics.

Over the past few years, these telecom companies have proactively engaged in digital transformation strategies, enhancing their investments in 5G networks, cloud computing, and big data to create a robust digital foundation. This evolution has seen them emerge as essential players in the domestic cloud computing landscape. For example, China Mobile has emphasized developing the 'Nine Heavens' AI platform, while China Unicom has rolled out its "Unicom Cloud," and China Telecom continues to optimize its Tianyi Cloud offerings. Such initiatives not only boost the operational efficiency of these companies but also establish a strong foundation for engaging with the growing AI ecosystem.

According to IDC statistics, by the first half of 2024, China's Telecom and Mobile are projected to capture a market share of 13% and 9% respectively in the domestic public cloud Infrastructure-as-a-Service (IaaS) sector, placing them as the third and fourth largest players in this domain.

Additionally, these operators are pivotal in driving the advancement of domestic computing power. Data from Tianfeng Securities indicates that in the first half of 2024, telecom operators accounted for 55.8% of the total number of tenders related to intelligent computing centers, asserting their dominance in this burgeoning field.

Looking ahead, the three major telecom operators plan to construct a staggering total of 31.6 ExaFlops of intelligent computing capabilities in 2024, representing a remarkable year-on-year growth of 107%. This includes projected constructions of 6.9 ExaFlops by China Mobile, 14.7 ExaFlops by China Unicom, and 10 ExaFlops by China Telecom.

Analysts at Huatai Securities anticipate that following DeepSeek's rollout, the advancement of AI applications will gain further depth and breadth, driving significant demand for data traffic and inference capabilities. Consequently, the occupancy rate of existing domestic data centers is expected to decline, and prices are set to stabilize, thus enhancing the prospects for the data center operations of these three telecom giants.

QuestMobile data analytics reveals that DeepSeek achieved a notable milestone on January 28, surpassing ByteDance's Douyin in terms of daily active users for the first time, eventually crossing the 30 million user mark on February 1, marking it as the fastest application to reach this benchmark.

As we approach 2025, a pivotal year for the explosion of AI applications, the demand for computing power is likely to surge. For the three major telecom operators, leveraging the once-in-a-lifetime opportunity presented by the AI revolution is crucial—not just for unlocking potential within capital markets, but for seizing the narrative during the AI era.