Investing.com -- A Hong Kong index tracking Chinese tech stocks has entered a technical bull market, lifted by a rally in China’s largest technology firms. The surge comes as investors bet on the potential of DeepSeek, a homegrown AI app that has rapidly gained global attention.
The Hang Seng Tech Index, which tracks the 30 largest technology firms listed in Hong Kong, jumped nearly 3% on Friday, although it lost some of the gains later, closing 1.8% higher at 5,150.35. The gain marks a more than 20% rebound from its January low, though the index remains below its all-time peak from early 2021. It is, however, nearing the 2024 high reached in October.
Leading the rally were PC maker Lenovo Group (HK:0992) and smartphone giant Xiaomi (OTC:XIACF) Corp (HK:1810), rising as much as 6.2% and 4.7%, respectively. Software (ETR:SOWGn) companies also saw strong gains as investors hoped that integrating DeepSeek’s AI model could boost growth. Enterprise software developer Kingdee (HK:0268) soared nearly 15%.
DeepSeek, a Chinese AI company that only recently emerged in the public eye, has sent shockwaves through global markets after claiming that its latest model, R1, rivals OpenAI’s o1 reasoning model in problem-solving ability while operating at a fraction of the cost.
The bullishness surrounding China’s AI sector has helped tech stocks weather the negative impact of additional US tariffs on Chinese imports.
“The global attention on DeepSeek can spur investors to reassess China’s innovation capacity, and which in our view could be a rerating catalyst for the Chinese equity market this year,” HSBC analysts wrote in a report.
Market analysts have pointed to a shift in AI investment focus, moving from infrastructure and semiconductors toward software and application platforms. DeepSeek’s open-source, cost-effective AI model could accelerate adoption across industries, particularly benefiting companies in cloud applications and AI-driven software.
Separately, HSBC described DeepSeek’s rise as the “dawn of universal AI adoption.” It noted that integrating the model into software businesses could enhance research and design efficiency while reducing costs, ultimately driving earnings growth in the medium term.
Citi analysts also see potential benefits for hardware manufacturers, suggesting that DeepSeek’s efficient AI model could speed up the deployment of generative AI on edge devices such as smartphones and smart glasses.
At the same time, DeepSeek’s rapid ascent has also drawn regulatory scrutiny. Australia and South Korea have banned the AI chatbot from government devices, citing security concerns.
Meanwhile, US lawmakers are set to introduce a bill on Friday seeking to prohibit the app’s use in the country.