Asian Shares Mixed: DeepSeek Boosts Chinese Tech Stocks

The Asian stock market experienced a mixed performance on Friday, February 7, 2025, with Chinese technology stocks rising on renewed interest in the country's tech firms following the release of AI models by DeepSeek. The Hang Seng Index in Hong Kong rose 1.35% to 31,173.35, while the Shanghai Composite Index gained 1.33% to 3,314.29. In contrast, Japan's Nikkei 225 dipped nearly 0.44% to 38,893.65, and South Korea's Kospi declined 0.23% to 2,530.79.

The rise in Chinese technology stocks can be attributed to the release of AI models by DeepSeek, which sparked renewed interest in the country's tech firms. Xiaomi's Hong Kong stock was up 5.67% to trade at 42.85 Hong Kong dollars, while Alibaba stock jumped 1.47% to trade at 100 Hong Kong dollars. Tencent, China's largest video game firm, jumped 1.90% to 428.40 Hong Kong dollars.



DeepSeek's AI models have outperformed OpenAI's current o1 model in several third-party tests, suggesting that U.S. tech giants may have made costly mistakes in developing their models. The key to DeepSeek's success is reportedly the structure of its AI model, which emphasizes software-driven optimization over sheer hardware power. DeepSeek reportedly uses tens of thousands of Nvidia's AI graphics processing units to train its models, but the U.S. banned export of these AI chips to China in September 2022, forcing DeepSeek and other AI technology companies to adapt their models to focus on memory optimization, data transfer efficiency, and innovative communication schemes among their chips.



The renewed interest in Chinese technology firms is driven by several key factors:

1. AI Models from DeepSeek: The release of AI models by DeepSeek has sparked renewed interest in China's technology firms. These models have outperformed OpenAI's current o1 model in several third-party tests, suggesting that U.S. tech giants may have made costly mistakes in developing their models.
2. Cost-Effective AI Solutions: DeepSeek's AI models are reportedly much cheaper to build and use than their American counterparts without sacrificing performance. DeepSeek-R1 costs just 55 cents per million input tokens and $2.19 per million output tokens, compared to OpenAI's models that reportedly cost $15 per million input tokens and $60 per million output tokens.
3. Access to the Chinese Market: The Chinese market, with its vast consumer base and growing demand for technology products, remains an attractive opportunity for investors. Despite geopolitical tensions, the potential for growth in the Chinese market continues to draw interest from both domestic and international investors.
4. Government Support and Initiatives: The Chinese government has been actively promoting and investing in the development of its technology sector. Initiatives such as "Made in China 2025" and the "New Infrastructure" plan have provided significant support to domestic technology firms, fostering innovation and growth.

The long-term sustainability of this trend depends on several factors, including technological advancements, the regulatory environment, market demand and adoption, and talent and workforce development. Chinese technology firms must continue to innovate and develop cutting-edge technologies to maintain their competitive edge. The success of DeepSeek's AI models has shown that Chinese firms can compete with their Western counterparts, but sustained innovation is crucial for long-term success.

In conclusion, the Asian stock market experienced a mixed performance on Friday, February 7, 2025, with Chinese technology stocks rising on renewed interest in the country's tech firms following the release of AI models by DeepSeek. The rise in Chinese technology stocks can be attributed to several key factors, including AI models from DeepSeek, cost-effective AI solutions, access to the Chinese market, and government support and initiatives. The long-term sustainability of this trend depends on several factors, including technological advancements, the regulatory environment, market demand and adoption, and talent and workforce development.