According to the Zhito Finance APP, Goldman Sachs has pointed out in a recent report that hedge funds around the world have been buying Chinese stocks in large amounts for most of this year. Notably, as the Chinese AI startup DeepSeek has fully emerged, leading a new AI large model computing paradigm centered on 'low cost' and 'high efficiency', Goldman Sachs stated that DeepSeek has begun to deeply integrate with AI application terminals such as Consumer Electronics, further intensifying global investors' bullish enthusiasm for Chinese stocks over the past week.

In a client report, Goldman Sachs noted that based on capital flow compilation data as of February 7, the offshore and onshore Chinese stock markets (including US-listed Chinese stocks, Hong Kong stocks, and A-shares) have merged to become the largest stock market globally in terms of 'nominal net purchase scale', which has attracted the attention of global investment institutions.

Statistics compiled by Goldman Sachs show that from February 3 to 7, the purchasing scale of hedge funds for offshore and onshore Chinese stocks reached the highest level in four months. Goldman Sachs' major brokerage division provides financing to global investment management institutions such as hedge funds and can see their capital trading flow.

DeepSeek has triggered a global investment frenzy around Chinese AI.

The epoch-making 'ultra-low cost AI large model' launched by DeepSeek has become an unprecedented 'bullish catalyst' for global investors to reassess Chinese assets, especially the Chinese stock market (including Hong Kong stocks and A-shares), as these investors had already grown concerned about the soaring valuations of US tech stocks. The emergence of DeepSeek has sparked an unprecedented wave of investment in the field of Chinese artificial intelligence, attracting global capital, including leveraged hedge funds and traditional asset management giants.

Since the launch of DeepSeek, whose performance rivals that of o1, major Chinese Internet companies and other tech firms have become new emerging threats in the AI field in the USA. Although faced with restrictions from Western countries on importing the most advanced chips, the development cost of DeepSeek applications is much lower than that of American competitors. This launch wiped out more than 500 billion dollars in market value of NVIDIA, the 'AI chip king', in a single day.

Recently, the AI engineer team from China that created the DeepSeek R1 large model has topped the trending searches in the USA, and DeepSeek applications continue to dominate the free APP download rankings in the Apple app stores in both China and the USA, surpassing ChatGPT in the US download rankings.

The DeepSeek team has demonstrated that they can train breakthrough open-source AI models with world-class inference capabilities using very low-cost, average-performance AI accelerators without top-tier high-performance AI GPUs from NVIDIA. With an investment cost of less than $6 million and the conditions of 2048 H800 chips, which significantly underperform compared to H100 and Blackwell, the DeepSeek team has produced open-source AI models comparable in performance to OpenAI's o1. In contrast, the training costs for Anthropic and OpenAI reach as high as $1 billion, and the pricing for DeepSeek's inference input and output tokens could be seen as a "bargain-level" promotion compared to OpenAI's pricing.

As the "DeepSeek low-compute cost storm" sweeps the globe, investors have begun to strongly question whether the recent extravagant AI spending plans of American tech giants are reasonable. After all, the tens of billions of dollars in expenses compared to DeepSeek's million-dollar level costs has left these American tech stock investors both shocked and furious, as they believe shareholder profits are being continuously eroded by unreasonable spending. Consequently, they have been persistently selling off the seven major US tech stocks with high valuations since the end of January.

A sales director from an institution in Hong Kong stated, "DeepSeek is changing the pessimistic narrative that 'China is irrelevant in the AI field and is losing the AI war.'"

The open-source AI large model DeepSeek R1 launched by DeepSeek, whose performance rivals that of OpenAI's o1 model, has significantly lower training and inference costs than OpenAI, triggering a global bullish sentiment among investors towards Chinese internet companies as well as leaders in China's semiconductor and software industries, propelling the benchmark index for Chinese tech stocks traded on the Hong Kong stock market—namely, the Hang Seng TECH Index—into a so-called "technical bull market."

In the Hong Kong stock market, the optimistic sentiment anticipating a "long bull market" is arguably even more fervent than in the A-shares market. Benefiting from the Federal Reserve's interest rate cuts and the liquidity support provided by domestic monetary stimulus policies, the Hong Kong stock market is seen as reaping the "dual liquidity dividend" from both China and the USA, along with the recent AI investment frenzy ignited by DeepSeek. As such, the Hong Kong stock market serves as the best entry point for external asset management institutions like hedge funds to invest in Chinese companies.

The Hang Seng TECH Index, which includes Chinese tech giants such as Alibaba, Tencent, and Baidu, is renowned as the "Eastern NASDAQ," and is benchmarked by some institutions against the NASDAQ 100 Index, which includes American tech giants such as Apple, NVIDIA, Microsoft, and Google. It is believed that as these Chinese tech giants continue to grow in performance and Market Cap, the future "complete Hang Seng TECH Index" could potentially mirror the NASDAQ 100 Index.

As Alibaba and Tencent showcase their labels as 'encompassing cutting-edge AI models + powerful cloud AI computing systems + complete AI application software developer platforms', and as the scale of these labels grows with AI application software penetrating various industries in China, the future market scale is expected to rival that of Amazon AWS and Microsoft, possibly triggering a similar investment boom that attracted global capital to North American cloud computing giants in 2023-2024.

If killer-level AI Application software/AI agents begin to emerge on a large scale in 2025, it would be a significant benefit for cloud giants like Alibaba, Tencent, and JD.com. These AI software applications, both the early-stage ecosystem platforms for AI software developers and the subsequently massive cloud-based AI inference computational power resources, depend heavily on the robust computing platform support provided by these cloud giants. These cloud giants are focusing on the layout and development of B-end and C-end AI Application software developers ecosystems related to generative AI, aiming to fully lower the technical barriers for non-IT professionals in various industries to develop AI applications.

The call for "Going Long on China" has recently echoed on Wall Street, and A-shares in Hk may usher in a "Sputnik Moment" in 2025.

Some Wall Street analysts and institutional investors have stated that in addition to the all-encompassing investment frenzy in China's AI triggered by DeepSeek, the bullish sentiment for the Chinese stock market is increasingly supported by the loose policy tone from Peking, and the latest 10% additional tariff imposed by U.S. President Trump on Chinese goods is far lower than what he initially threatened, which has reassured the market.

According to statistics, the MSCI Chinese Index has risen for four consecutive weeks since mid-January, and has increased over 6% since February, outperforming major global stock markets.

Goldman Sachs, after experiencing the "DeepSeek Shockwave" that hit U.S. tech giants hard, reiterated its bullish sentiment for the Chinese stock market, expecting the MSCI Chinese Index to rise to 75 points this year under neutral expectations, and under optimistic expectations, the index could soar by 28%. Goldman emphasized that stocks in the "soft technology" sector are expected to perform better than the entire Large Cap. The MSCI Chinese Index includes core Chinese assets such as Alibaba, Tencent, Kweichow Moutai, and China Yangtze Power, currently lingering around 69 points.

It is understood that last year, the U.S. billionaire David Tepper, who boasted about "buying all Chinese assets," significantly increased his hedge fund Appaloosa LP's holdings in two major Chinese concept stocks—Chinese internet giants Alibaba and JD.com—during the fourth quarter. According to a securities investment filing report this week, these two companies have become one of the largest positions in his hedge fund.

In terms of specific capital trends, statistics compiled by Goldman Sachs show that last week, 95% of the buy-ins on offshore and onshore Chinese stock markets by hedge funds were concentrated on a single stock, primarily from sectors such as consumer discretionary, information technology, internet, industrials, and communications services. In contrast, energy, utilities, and real estate were sold off by global hedge funds.

Currently, the allocation ratio of global funds to the offshore and onshore Chinese stock market remains at historically low levels, which is why financial giants like Goldman Sachs have recently shouted that the upward trend of Chinese assets is far from over. Data compiled by Goldman shows that the allocation of hedge funds in the Chinese stock market accounts for 7.6% of the major brokerage accounts combined by Goldman, ranking only at the 23rd percentile over the past five years, but significantly improving compared to last month, when it was only about the 10th percentile in January.

After the emergence of DeepSeek, some top strategists on Wall Street generally hold a bullish view on the Chinese stock market. They believe that as the recognition of China's technology companies' global competitiveness increases, the "China discount" will completely disappear, and stock indices are expected to break through previous historical highs. Michael Hartnett, a well-known strategist from another major Wall Street firm, Bank of America, stated that after years of strong growth, the performance of the US stock market will gradually weaken starting in early 2025. The main driving force behind the rise of US stocks—the "seven giants"—can no longer provide long-term support for the market, and therefore this strategist advises investors to start buying into the Chinese stock market.

In a report published on February 5, Deutsche Bank analyst Peter Milliken centered the concept of "China's Sputnik moment", arguing that China's technological innovation has triggered a "cognitive leap" globally. American Silicon Valley investor Marc Andreessen even referred to the launch of DeepSeek as the "Sputnik moment of AI", symbolizing that China's technological rise can no longer be ignored. (The Soviet Union successfully launched the world's first artificial satellite, Sputnik 1, in 1957, making the "Sputnik moment" a symbol of significant changes in the global competitive landscape.)

The report indicates that 2025 will be a year for global investors to reassess the Chinese stock market. From textiles and steel to electronic products, and the rapidly rising new energy vehicles, nuclear energy, high-speed rail, and AI in recent years, Chinese companies demonstrate strong global competitiveness. The market is expected to reevaluate the 'China Discount', pushing Chinese A-shares and Hong Kong stocks into a long-term bull market.

One of the world's largest hedge funds, Man Group, recently stated that it is very optimistic about the investment prospects of the Chinese stock market. The head of Asian stocks at the firm, Andrew Swan, stated that technological development—primarily represented by breakthrough AI technologies such as DeepSeek, as well as changes in economic models—will have a greater impact on the investment return prospects in the Chinese market. Since President Trump took office, his tariff policy towards China has also become a concern in the investment community; however, Swan believes that the impact of Trump's tariffs on China will actually be much smaller than it was eight years ago and that it may be avoided through reaching an agreement.