With a series of stimulus policies being announced and DeepSeek gaining popularity due to its low-cost and high-performance advantages, Chinese concept stocks have sounded the horn of counterattack this year. The Nasdaq China Golden Dragon Index has risen more than 8% this year, significantly outperforming the S&P 500 Index, which has only increased by about 2% in the same period; several Chinese concept stocks are showing strong profit effects, with Kingsoft Cloud soaring more than 60% this year and Xpeng Motors rising over 43%.

DeepSeek not only lowers the cost of using large models and accelerates the implementation of downstream AI applications, but it may also reshape the Industry Chain layout and drive the evolution of supply and demand in the global computing power market; meanwhile, in the context of some foreign large models being closed, DeepSeek has chosen to open source to the world, showcasing the confidence and strength of Chinese technology, significantly enhancing market confidence and risk appetite, which may stimulate overseas funds to increase their allocation to Chinese technology stocks.

At the same time, more and more international major banks are joining the bullish outlook on the Chinese stock market. Chinese asset ETFs are attracting significant inflow in the U.S. stock market, and foreign capital is using 'real money' to support the rise of Chinese concept stocks.

Multiple major banks are supporting! The Chinese stock market is expected to welcome a valuation reassessment this year.

Due to the explosive popularity of DeepSeek, there has been an increase in the valuation of domestic cloud computing and large model related enterprises. Not only are domestic funds continuously increasing their positions in Hong Kong stocks, but many foreign investments have also recently flowed in, with Alibaba and other popular Chinese concept stocks being among those most benefitting from foreign capital replenishing their positions.

Data compiled by Bloomberg shows that $KraneShares CSI China Internet ETF (KWEB.US)$ On February 7, there was a net inflow of $0.287 billion, with assets growing by 4.8% to $6.26 billion, reaching the highest level since November 13.

Meanwhile, many international banks such as Goldman Sachs, Deutsche Bank, Bank of America, and Blackrock are all bullish on the future development of China assets. The main reasons include the value reassessment of Chinese concept stocks triggered by DeepSeek, policy support for the development of Chinese Technology enterprises, and the diminishing leading advantage of the US stock market.

Goldman Sachs Analyst David J. Kostin pointed out that the rise of DeepSeek means that the development of the AI industry is shifting from the hardware infrastructure layer to the software application layer; meanwhile, Chinese concept Technology stocks have significant advantages in the AI software sector, with the profit proportion of Software technology in the MSCI Chinese Index reaching 37% and the Market Cap share at 32%. Based on this determination, Goldman Sachs maintains an overweight rating on the MSCI Chinese Index and expects the index to increase by 14% in 2024, and in a more optimistic scenario, it could even rise by 28%.

Analysts from HSBC and Deutsche Bank unanimously believe that the global attention to DeepSeek can stimulate investors to reassess China's innovation capabilities, which may be a catalyst for the rise of the Chinese stock market this year. Currently, the trading valuation of the MSCI Chinese Index is lower than that of the global index and is close to the lower end of its valuation range.

Blackrock's fund managers also sent optimistic signals. The bank believes that, under policy guidance and after several years of transformation rebound, the Chinese economy is expected to achieve preliminary results in new quality productivity, especially in the high-tech manufacturing sector, and the economic growth rate will return to a virtuous cycle. Bank of America expects that the leading advantage of the US stock market will diminish this year, suggesting going long on Chinese stocks, and anticipates that the trade and technology war between China and the US will not escalate.

DeepSeek is stirring the AI landscape! What other investment opportunities are there?

DeepSeek has emerged with outstanding performance and innovative technology, reducing reasoning costs to one-tenth of the industry average, achieving significant effects and creating another wave of AI investment fever in the capital markets: from computing power infrastructure to industry application scenarios, from chip manufacturers to data service providers, related symbol stock prices are rising one after another. However, this AI investment feast is far from over; what further investment opportunities in the market are worth taking a gamble on next?

CITIC SEC analysis believes that the current AI revolution is fundamentally different from the mobile Internet; the mobile Internet had a hardware platform (Smart Phone) followed by a software ecosystem, while this round of AI first has models (Software) and then new Hardware (glasses, toys, Smart Phones, Autos, etc.) appear. In the future, all Hardware will use Agents as interaction entry points, with an underlying operating system centered on LLM.

Based on this, multiple Institutions' research reports on DeepSeek have indicated several categories of investment opportunities - AI Software and Hardware, Cloud Computing and Big Data, domestic computing power leaders, and frontier Technologies such as intelligent driving and low-altitude economy.

The CICC Research Department pointed out that with breakthroughs in AI technology in China, global capital flows may change, and some overseas funds may readjust their positions in the Chinese stock market, especially in cutting-edge technology sectors such as AI Software and Hardware, Robotics, New Energy Autos, and Low Altitude Economy. In the long term, this could bring new investment opportunities.

Huafu Securities stated that the period from after the Spring Festival to the Two Sessions is the main battleground for the spring market, recommending to focus on the AI-dominated Technology Sector for layout, with current emphasis on the Intelligent Driving and Low Altitude Economy sectors. The Low Altitude Economy, as a new productive force, has attracted much attention, and Guangzhou will implement the 'Guangzhou Low Altitude Economy Development Regulations' in February 2025, with other regions expected to follow. In terms of Intelligent Driving, BYD is vigorously promoting the popularization of Q&M Dental Intelligent Driving experience, which is likely to produce a catfish effect in the industry and promote equality in intelligent driving.

Looking ahead, many experts indicate that China's Assets are likely to welcome numerous investment opportunities across various Sectors driven by valuation recovery, liquidity improvement, and profit growth. Additionally, as Trump's policies gradually take effect, the USD may peak and decline, which could increase the allocation of risk assets in the portfolio.

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