Chinese and Hong Kong technology stocks soared on Monday, fuelled by growing enthusiasm for domestic artificial intelligence advancements. The latest catalyst came from AI startup DeepSeek, whose breakthrough model has intensified investor confidence in China’s ability to compete on the global AI stage.
DeepSeek’s R1 AI model, released in late January, quickly gained traction by matching the capabilities of leading competitors such as ChatGPT, despite operating on older hardware and a fraction of the budget. This impressive feat triggered a surge in major tech stocks across the region. Hong Kong-listed Baidu shares climbed 3.5%, while Xiaomi saw a 3.2% rise, reaching new all-time highs. Alibaba experienced a substantial 6% increase, bolstered by the release of its own AI model, Qwen2.5-Max, positioning itself among the leading players in the AI race.
Other key tech firms also benefited from the momentum. JD.com shares rose 2.4%, and NetEase saw a 2% gain as it continued to integrate AI into gaming and educational platforms. Tencent Holdings followed suit with a 2.3% increase, reflecting the widespread optimism in the sector. Even U.S.-listed PDD Holdings recorded a 1.4% rise in its last session, reinforcing the global impact of China’s AI advancements.
A significant factor behind this rally was DeepSeek’s open-source large language model, which has found rapid adoption across industries such as automotive and telecommunications. Great Wall Motor Co has integrated DeepSeek’s AI into its “Coffee Intelligence” vehicle system, while major telecom firms are leveraging the technology to enhance their services. These real-world applications demonstrated the tangible impact of China’s AI innovations, further fuelling investor confidence.
Additionally, DeepSeek’s success reinforced the resilience of China’s AI sector despite ongoing U.S. restrictions on advanced AI technology exports. The rapid development of homegrown alternatives has encouraged a renewed bull market in local tech stocks, which had been undervalued following years of market downturns. As a result, investors are now seizing the opportunity to capitalise on China’s accelerating AI momentum.
DeepSeek’s breakthrough has not only underscored China’s growing AI capabilities but also reignited investor interest in a sector poised for further innovation. The rally signals a shift in sentiment, positioning Chinese tech firms as formidable players in the evolving AI landscape.
Fidelity China Special Situations PLC (LON:FCSS), the UK’s largest China Investment Trust, capitalises on Fidelity’s extensive, locally-based analyst team to find attractive opportunities in a market too big to ignore.
