China tech stocks have been on a tear recently, fueled by DeepSeek, and JPMorgan says it strongly believes the rally will last more than a month.

Chinese tech stocks led by Alibaba (09988) have surged on the launch of DeepSeek's large language model. Morgan Stanley said the China internet index ETF (KWEB) that tracks Chinese internet stocks has returned 22% this year, mainly driven by the re-emergence of trading activity amid the China AI fever. The brokerage believes this latest rebound in Chinese internet stocks will be more sustainable than the two previous industry rebounds in April and September last year, and strongly believes it will not be a one-month rally. The brokerage said the latest internet stock rally is mainly driven by China's AI development, and the emergence of DeepSeek has brought positive surprises to the investment community. It believes as AI applications increase, the revenue of internet cloud companies will accelerate in the next few quarters, supporting stock prices. The AI rally in the US has lasted for two years, and the average share price of the seven US internet giants has risen 256%, outperforming the 59% of the S&P 500 index in the same period. Among them, Nvidia (NVDA.US) has seen its share price rise 850% amid the continued fundamental support. Morgan Stanley said the experience from the US AI rally is that valuation re-rating driven by long-term disruptive fundamental developments can last for a long time, provided that individual companies have positive developments in AI and the market or country's beta is positive. DeepSeek will further drive AI consumption in China and accelerate revenue growth in cloud businesses. Based on the expected positive adjustment in Alibaba Cloud's revenue, and its confirmation as a top-tier cloud service in China, the valuation multiple will rise, which will become the two main driving forces for Alibaba's share price. The brokerage said Tencent and Baidu's share prices may be driven by AI development in different ways, but both face different risks. For example, the value of Tencent Cloud has been fully reflected in its share price. Therefore, Alibaba is the best beneficiary of the current theme of China's generative AI development.