On February 24, 2025, the spotlight on CNBC highlighted the remarkable ascent of the Chinese AI company DeepSeek, sending ripples through the global technology and finance sectorsThe company’s open-source large model, DeepSeek-R1, showcased significant advantages in "low cost and high performance," which completely disrupted traditional industry standardsThis innovation acted as a powerful engine that propelled the rapid growth of Chinese concept stocks in the AI sector, resulting in a staggering 23% surge within a week — a record high in three years — reflecting the vibrant vitality of China's AI industryIn stark contrast, India’s tech market found itself in turmoil as foreign investment plummeted by 42% year-over-year due to erratic policy shifts and inadequate industrial transformationThis disparity reflects an intense collision of technological revolutions and geopolitical rivalry between the two nations.

The launch of DeepSeek-R1 is hailed as a miracle in the industryThis groundbreaking model required a mere $5.6 million in training costs and exhibited performance on par with OpenAI’s GPT-4 in critical tasks like mathematical reasoning and code generationEven more astonishing is its API price, which is just one-tenth that of GPT-4, significantly lowering barriers to applying AI technologyDeepSeek achieved this breakthrough thanks to its unique hybrid expert architecture and 8-bit floating-point training techniquesIn circumstances of limited hardware resources, these innovations dramatically improved computational efficiency, earning significant praise from Meta’s chief scientist, Yang Likun, who hailed it as a "milestone in open-source models." Such innovations not only granted DeepSeek a competitive edge in the market but also paved new paths for global AI technology development.

DeepSeek champions an open-sharing philosophy by issuing technical reports and model weights to encourage developers worldwide to replicate its achievements

Advertisements

This move has sparked a chain reaction across the globe, with companies like French AI unicorn Mistral and US-based search tool Perplexity integrating DeepSeek’s models into their product lines, which further expanded the technology's reachIn the wake of this open-source ecosystem's impact, industry giants like OpenAI have felt compelled to accelerate their efforts toward technical transparency, responding to competitive pressuresMicrosoft CEO Satya Nadella notably stated, "The engineering innovation coming from China in AI cannot be ignored," reflecting the increasing influence of Chinese AI technology on the international stage.

The technological breakthroughs by DeepSeek have resonated throughout the industry chainIn the realm of computational equipment, AI chip concept stocks like AAC Technologies have witnessed monthly rises exceeding 50%, indicating robust market vitalityIn various application scenarios, significant orders worth billions have erupted in sectors such as smart vehicles, medical diagnostics, and code development, continuously expanding and deepening the applications of AI technologyThis growing interest has also led to a surge in capital, with reputable institutions like Sequoia China and Tencent significantly increasing their investments in AI infrastructure funds, surpassing one trillion yuan in total fund sizes, thus providing solid financial backing for the development of the AI industry.

On the capital absorption front, investments from foreign entities into China's AI sector soared by 68% from January to February, with international giants like Tesla and Nvidia expanding their research centers in the country, demonstrating a robust confidence in the Chinese AI industryOn the other hand, the Indian market is grappling with various challengesThe uncertainty of regulatory policies has deterred foreign investment, leading to significant withdrawals from firms like Google and Amazon, who are scaling back their investments in India amid frequent policy shifts regarding foreign ownership caps and data localization.

Moreover, India holds a meager share of core AI patents globally, accounting for less than 1%, and its heavy reliance on an outsourcing model renders it vulnerable to the disruption caused by increasing automation

Advertisements

Investment has also been severely impacted, as evidenced by a 12% decline in the Bombay Sensex index this year, with tech stocks experiencing over a 30% valuation adjustment, plunging India’s tech industry into serious troubleDespite the rapid development of China’s AI industry, it faces its own risksThe United States has proposed including the H800 chip in export controls, which could impede the progress of domestic replacements and restrict the computational capacity of China’s AI sector.

Some AI concept stocks in China sport price-to-earnings ratios exceeding 200 times, posing risks of valuation bubbles, with skepticism surrounding their ability to deliver on financial promisesFurthermore, controversies regarding the data sources of DeepSeek’s models linger, with potential open-source compliance risks that could trigger international intellectual property disputesThe competitive geopolitical landscape is intensifying, especially as the US and Europe accelerate their formation of an "AI coalition," which amplifies the contest for technical standards.

Goldman Sachs has projected that "China's AI has transitioned from 'applied innovation' to 'foundational innovation,' with self-sufficiency in computing power and an open-source ecosystem forming a long-term competitive moat." Ray Dalio of Bridgewater Fund remarked that "investing in China's AI over the next five years should focus on 'hard tech and commercialized closed-loop' enterprises." UBS cautioned investors to be wary of short-term speculative tendencies and to pay attention to the proportion of corporate R&D investments and their global operational capabilitiesThese institutional insights offer a directional compass for investors, emphasizing the importance of long-termism and a focus on core competitiveness when investing in China's AI sector.

The rise of DeepSeek vividly illustrates China’s transition from the era of "manufacturing dividends" to that of "intelligent manufacturing dividends." The contrasting trends between the faltering Indian market and the furious pace of growth in Chinese AI underscore a compelling narrative

Advertisements

Advertisements

Advertisements