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DeepSeek brought China back into the AI race and caused a seismic shift in the world stock market. This AI launch has reshaped China equities, gaining 26% over traditionally strong Indian markets. In the last few years, US tech firms grabbed the headlines for AI advancements and India for its investments. Still, the January launch of DeepSeek has far-reaching implications for the Asian markets and global investors.
Nvidia’s dominance was due to its GPU. These GPUs trained AI models, but at an exorbitant cost, swelling Nvidia's stock price. Deepseek can do the same but at a fraction of the cost. This innovation has challenged long-established U.S. technology leaders. At the same time, market response has been decisive, with the Hang Seng Index reaching a rally not seen in the last three years, reflecting growing confidence in China's technological advancement.
On 11 February 2025, Alibaba launched its Qwen 2.5 model. This is the ripple effect of DeepSeek, and now it seems that these are baby steps for China's technological industry. This renaissance moment underlines China's ability to innovate while maintaining cost-effective structures. Global investors are taking note of this progress. Fund managers at Nomura are interested in Chinese and Hong Kong markets, raising the stock value to “Overweight”.
The MSCI China Index has gained 18% this year compared to the MSCI India Index, which fell by 7%. The contrasting performance between Chinese and Indian markets is now more pronounced. Lion Global Investors’ Thian Siew Hua notes a pattern between the two markets: A strong Chinese market always coincides with declining investors interest in Indian markets.
Indian markets are underperforming. The GDP figures from last September reveal a 5.4% slowdown. At the same time, government projections for the fiscal year ending March are at a low of 6.4%. This is the lowest forecast for Indian markets in the last four years. This slowdown and declining foreign investment flow have rotated the investment flow to the newfound China AI tech opportunities.
Nomura’s recent findings reveal that global investors reflect new investor confidence in Chinese markets. Reallocating their share of global capital by reducing 50% of funds from Indian markets by January end. This reallocation trend gains momentum as more investors recognize the potential of China’s evolving tech sector's promise in its technological capabilities and economic prospects.
Market experts appreciate the promise in China’s AI rally with a caution that investors should maintain a balanced perspective. This new tech-led market can only be sustained with continued innovation and favorable regulatory conditions. Now, the new market outlook must decide on regional investment depending on the global economic conditions, making it essential for investors to monitor broad market conditions alongside technological developments.
DeepSeek has changed the tech sector for the Asian markets. Chinese companies have demonstrated their ability to compete against global competitors, especially in the artificial intelligence sector. For international investors, the new innovations in the tech sector have started influencing the patterns in their investment planning. Now, just with the launch of tech without even reaching its entire promise, investors flock from one market to another. This is a wake-up call for Indian tech companies and their regulatory bodies. This millennium now belongs to Artificial Intelligence, and whoever can do greater calculations and train AI models at lower cost will become the eye candy of investors. Though how long China can maintain this lead is debatable, it has shown the world that it has a place in this new AI market and wants to dominate it.
