Abrams' emergence of DeepSeek has had a positive impact on sentiment in the Chinese tech stock market.

Abrdn's Head of China Multi-Asset Investment Solutions, Rohan Khanna, stated that DeepSeek's development trajectory aligns more with the optimistic expectation of Jevons Paradox, which suggests that efficiency gains lead to net demand growth. He explained that under Jevons Paradox, DeepSeek's emergence has not had the negative impact on the AI supply chain as anticipated, but has instead accelerated AI adoption due to efficiency gains and even further solidified AI as an investment theme.

Abrdn believes that the software and application segments of the AI supply chain hold greater investment opportunities than the hardware and energy segments. DeepSeek's breakthrough challenges the high valuation premium of US tech stocks, as the US will no longer be the only country dominating AI technology, especially in the context of its open-source model. This may exacerbate the downside risk of US large-cap tech stocks and trigger a rotation of funds to other sectors.

Considering the tight link between US stock valuations, US household wealth and consumption, and economic growth, he said that the risk of a downward adjustment in US tech stocks could undermine US exceptionalism and turn the returns of US stocks and duration investments into negative correlation. On the other hand, the emergence of DeepSeek has a positive impact on the sentiment of Chinese tech stocks. Abrdn observed that some Chinese tech giants have the ability to build AI models comparable to DeepSeek, which is a tactical positive factor for the MSCI China Index, especially in the current low valuation, light allocation, and rebounding earnings cycle.