The rise of DeepSeek, a burgeoning name in the AI landscape, has captivated investors and analysts alike, highlighting the remarkable potential of Chinese tech stocksRecently, Goldman Sachs issued a statement emphasizing the significance of DeepSeek's emergence, suggesting that this development could catalyze a medium- to long-term reevaluation of Chinese technology assetsWith a neutral outlook, they predict the MSCI China Index could experience a 14% increase by the end of 2025, while optimistic scenarios could see gains soaring to as much as 28%.

What is particularly noteworthy is how the performance of DeepSeek and other innovations has shifted perceptions among foreign investment firms regarding Chinese assetsThe expectations surrounding China’s technological advancements have begun to exceed prior forecasts, leading global investors to reassess the weight these assets carry in their portfolios.

Since February, major foreign investment institutions, including Deutsche Bank, Goldman Sachs, and Bank of America, have expressed bullish positions on Chinese assetsDeutsche Bank's analysts have boldly claimed that by 2025, the performance of Chinese assets will outshine that of other global marketsMeanwhile, the Bank of America has advised its clients to take long positions in Chinese equities, suggesting a strategic pivot towards this sector.

The compelling narrative surrounding DeepSeek began just before the Chinese New Year when the startup unveiled two open-source large modelsThese models, which boasted performance metrics rivaling those of industry leaders, significantly reduced both training and inference costsThis revelation sent shockwaves throughout both local and global tech circles.

Peter Milliken, Deutsche Bank’s head of research for the Asia-Pacific region, commented on the pivotal moment being driven by DeepSeek, stating, “Chinese technological achievements have long been underestimated by investorsThe launch of DeepSeek vindicates the value of Chinese intellectual property, as the country's advantages in high-value sectors and its dominant role in global supply chains continue to expand at an unprecedented pace.”

Goldman Sachs has also articulated that the rise of DeepSeek symbolizes a transition in the AI industry from hardware-centric infrastructures to software-based applications

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This shift not only presents new opportunities for diversification in global markets but also specifically highlights the favorable outlook for Chinese tech stocks.

The investment logic dictated by AI is shifting away from hardware towards software, leading analysts at Goldman Sachs to call for an overweight position on Chinese technology stocks, particularly those companies that exhibit innovative capabilities and possess competitive advantages in AI applications.

Analysts anticipate that by 2025, the reevaluation of Chinese tech stocks may be just the tip of the icebergThey note that a host of foreign investment bodies are reshuffling their portfolios to include greater exposure to Chinese assetsNotably, Deutsche Bank has pointed to a broader recognition of the competitive advantage held by China in manufacturing and services, suggesting that the current valuation discount for Chinese equities is likely to disappear in light of potentially robust corporate earnings bolstered by supportive policies.

Additionally, as briefed at the World Economic Forum in Davos, Nicolai Tangen, CEO of the Norwegian Government Pension Fund Global, expressed a contrarian investment strategy, advocating for the divestment from U.S. tech stocks and private debt in favor of strengthening holdings in Chinese assetsMarket data indicates that by the end of 2024, the value of Chinese securities held by the Norwegian fund appreciated by over $7 billion compared to the end of 2023.

This perspective on foreign investors’ renewed optimism concerning Chinese assets stems fundamentally from a robust belief in China's economic trajectoryWang Xiaojing, who directs multi-asset and quantitative investments at BlackRock and manages the BlackRock CSI 300 Enhanced Index Fund, anticipates that after several years of transformative recovery, China's economy will yield significant achievements in high-tech manufacturing and increase the labor force participation rate, thus fueling further economic circulation and growth.

Wang noted, “Given these factors, along with our calculations based on a long-term premium blend model, we hold an optimistic view on the mid-term outlook for the Chinese market over the next 12 to 36 months, favoring both Chinese equities and government bonds.” Furthermore, Wang emphasized that from a long-term risk premium model perspective, the long-term investment value of A-shares, especially in larger companies, currently offers better cost-efficiency than most periods over the preceding ten to twenty years.

In reality, external interest in Chinese assets has ignited more than just speculative optimism; actual trading activities around value reevaluation are already underway

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Analysis from the China Aviation Securities strategy team illustrated that following the release of the DeepSeek-R1 model, shares of Chinese firms surged, with Hong Kong and U.SChinese tech stocks significantly outperforming global indicesSpecifically, the Hang Seng Tech Index and NASDAQ’s Chinese tech stocks recorded gains of 12.08% and 14.16%, respectively, just days after the launch.

After the New Year holiday, A-shares also demonstrated a remarkable resurgence, accelerated by the AI market’s strong performanceOn February 7, total trading volume across A-shares approached a staggering ¥20 trillionReports from Minsheng Securities highlighted that personal investor sentiment remained at historically elevated levels, indicating a bullish momentum while institutional confidence rebounded sharply after prolonged lows, lending credence to a likely upward trend in market phases.

In this climate, many institutions believe that a spring bull run for A-shares is on the horizonThe China Aviation Securities strategy team showcased that a significant rally could be imminent, drawing parallels to prior market cycles where trends similarly sparked significant growth in tech-related investments.

Moreover, the Huatai Securities analysis team noted that two pressing constraints affecting the market have been alleviated, and the revitalization of market confidence prompted by DeepSeek has laid the groundwork for a longer-lasting spring narrative, highlighting tech sector opportunities that remain robust and significant.

This optimistic outlook is supported by actions from foreign investors, contributing increased engagement levels and heightened enthusiasm within the technology sectorObservations show that although transactional participation has soared, it remains crucial to monitor the sustainability of these changes, primarily driven by domestic catalysts such as the recent breakthroughs in large domestic models.

Despite fluctuations in investor sentiment, the narrative surrounding A-shares appears to be gaining momentum, suggesting a renewed focus on AI applications and launching significant interest in other related technological spheres, such as AI-enhanced devices and robotics

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