Meanwhile, the US ‘Magnificent Seven’ stocks—Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla—have fallen by about 10% since the start of the year. This downturn has pushed the Nasdaq 100 Index close to a correction. The decline has been more pronounced in recent weeks, coinciding with DeepSeek’s impact on US markets.
DeepSeek’s Unique Position in AI
Unlike leading AI startups in the US, which are valued in the tens of billions and backed by major investors like Microsoft and Amazon, DeepSeek operates with no external investors beyond its founder, Liang, and his cofounders. Chinese corporate records indicate that Liang owns about 84% of the Hangzhou-based company, which he founded in 2023 using funds from High-Flyer Capital Management, a hedge fund he cofounded in 2015. Despite limited revenue, analysts estimate DeepSeek’s valuation at over $1 billion, with its only paid product being developer access to its models at significantly lower prices than OpenAI.
Factors Driving China’s Tech Rally
At the beginning of the year, US stocks reached record highs, while Chinese equities struggled due to regulatory challenges and slow consumer recovery. However, DeepSeek’s emergence changed market expectations, demonstrating that China’s artificial intelligence sector was catching up faster than anticipated.
Several factors are contributing to the rise of China’s tech stocks. As Vey-Sern Ling, managing director at Union Bancaire Privee, told Bloomberg, “The ingredients for China tech to shine are in place: Robust government backing, rebounding profits, and AI as a long-term growth engine.” He added that while US technology stocks have seen valuation surges over the past two years, they are now facing setbacks due to disappointing earnings and economic pressures, leading investors to shift capital toward Europe and China.
Government Support and AI Innovation
Strengthen China’s PositionChina’s technology sector gained additional momentum this week following Beijing’s announcement of new support measures and fresh AI advancements from companies like Alibaba. Bloomberg reported that the Hang Seng China Enterprises Index, which includes most of Societe Generale’s highlighted stocks, surged over 6% this week, reaching its highest level since late 2021.Despite the sharp increase, Societe Generale analysts, led by Frank Benzimra, argue that China’s ‘7 Titans’ remain attractively valued. A February 28 report from the firm noted that the group trades at 18 times forward earnings, making them over 40% cheaper than the US ‘Magnificent Seven’ stocks.
