February 18, 2025
By Anjali Kocchar
DeepSeek’s advanced AI technology has driven a remarkable $1.3 trillion surge in China’s stock market within just one month. Meanwhile, India’s market has experienced significant declines, with losses surpassing $270 billion.
The rise in Chinese stocks is largely attributed to DeepSeek’s AI tool, which has attracted major investments from hedge funds and international investors. Ken Wong, an Asian equity portfolio specialist at Eastspring Investments, highlights the increasing role of Chinese companies within the AI ecosystem as a key factor. His firm has been increasing its holdings in Chinese internet stocks, while moving away from smaller Indian stocks amid the market downturn.
This shift towards Chinese equities is seen as a sign of a new AI-driven economic growth in China. After years of regulatory challenges that alienated some foreign investors, China appears to be regaining its attractiveness, especially due to the success of AI-driven companies. Hedge funds like Fidelity International have refocused their attention on China, betting on the potential of DeepSeek’s technology and the possibility of further economic stimulus.
Leading tech companies such as Alibaba and Tencent have already begun reaping the benefits of increased AI investments. Alex Au, managing director at Alphalex Capital Management HK Ltd., stated that DeepSeek has piqued the interest of international investors in Chinese technology stocks, which could narrow the valuation gap between China and other markets.
On the other hand, India has faced considerable market challenges. In recent weeks, investors have been pulling out from Indian stocks and redirecting funds to China. This has resulted in a significant market loss for India, while China’s stock market has benefitted from increased investor confidence. Vivek Dhawan, a fund manager at Candriam, believes that China now offers a more attractive risk-reward ratio than India.
Despite the shifts, there are those who remain hopeful about India’s long-term prospects. Analysts at Morgan Stanley argue that India’s stock market growth will continue, suggesting that the recent correction is merely temporary. They believe that not all investments will flow into China, and India’s economic fundamentals remain strong.
There are, however, concerns about the sustainability of the current trend. Andrew Swan, head of Asia ex-Japan equities at Man Group, warns that while DeepSeek has sparked a surge in Chinese stocks, upcoming economic policies and stimulus measures from China should be carefully considered. Man Group has already increased its exposure to Chinese equities, adjusting its portfolio to reduce exposure to India.
The future of China’s stock market remains uncertain for some. Helen Zhu, CIO at Nan Fung Trinity HK Ltd., questions whether the AI-driven rally in Chinese stocks will be sustainable in the long term. The geopolitical backdrop, including ongoing tariffs and international tensions, adds complexity to the investment landscape.
While DeepSeek’s AI has certainly revitalised investor interest in China, the market’s future remains mixed. Some believe that the recent surge marks the start of sustained growth for China, while others caution that the volatility and geopolitical challenges could hinder the country’s progress. The coming months will be critical in determining whether this surge in Chinese stocks continues or if India’s market rebounds.
About the author
Anjali Kochhar covers cryptocurrency and blockchain stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
