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On February 21, 2025, DeepSeek made a significant announcement regarding its commitment to open-source developmentThe company revealed that over the next week, it would release five different code repositories, providing a fresh wave of content every day to showcase its technological advancesDeepSeek stated that the modules of its online services have been thoroughly tested and are ready for deployment in production environmentsThis strategic move reflects the company's belief in the power of sharing, emphasizing that each new release contributes positively to the momentum of technological progressDeepSeek identifies itself as a small, dynamic entity that values the startup spirit prevalent in the tech community instead of adhering to academia's aloofness.
Just a day prior, on February 20, Alibaba, the Chinese cloud service giant, released its third-quarter earnings report for the 2025 financial year, indicating an impressive 8% year-on-year revenue growth, surpassing the expected 6.6%. Specifically, its cloud revenue increased by 13%, outstripping market forecastsThe company’s capital expenditure reached 31.4 billion, significantly higher than anticipated and reflecting a strong investment in data centers, cloud computing, and artificial intelligence (AI). Experts projected Alibaba's capital expenditure to potentially reach as high as 150 billion by 2025, illustrating the ambitious trajectory of Chinese tech companies in the AI domain.
The immediate market reaction was robust, with Chinese stocks experiencing a renewed interest in computing powerSectors such as GPU chips, cloud service providers, telecom operators, data centers, optical modules, and software applications observed a remarkable surgeThis enthusiasm was particularly notable among ETFs (Exchange-Traded Funds) that focus heavily on sectors related to computing power, indicating increased investor confidence in these fields.
A noteworthy aspect of this wave of investment in AI, particularly in the Chinese context, is the rapid ascent of DeepSeek-R1, a domestically developed large-scale model that quickly gained traction among open-source models since the beginning of 2025. This particular model distinguished itself not only in performance—standing shoulder to shoulder with some of the world's leading proprietary models, like GPT-4—but also in cost-efficiency, reducing training costs by a staggering ten times
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This innovation boosts the efficiency of resource utilization, unlocking a broader scope for applications while also heightening the demand for inference and application computing power.
Alibaba's co-founder, Joseph Tsai, stated during a government summit that as more people recognize the transformative impact of DeepSeek, perspectives on investment in computing infrastructure would shiftHe asserted that the focus should pivot from pouring billions into training overly complex models, reminiscent of 'Nobel Prize-winning' AI, to addressing tangible problems seen in the real world and deploying AI solutions effectivelyThis mindset could potentially recalibrate investment strategies across the technology landscape.
As international tech giants such as Microsoft, Google, and Nvidia reassess their capital expenditures in response to this rapidly evolving market, Chinese companies are following suitBoth ByteDance and Tencent are also increasing their capital outflows significantly, signaling robust growth expectations within the sectorIn light of DeepSeek’s low-cost, high-performance open-source model, there is a renewed wave of optimism from foreign investment banks towards Chinese tech assetsFor instance, JPMorgan recently highlighted the attractiveness of Chinese tech stocks compared to their American counterparts, despite ongoing valuation discounts.
Structurally, the cloud computing sector, telecom operators, and data centers are projected to thrive in this environmentAnalysts from Morgan Stanley have identified data centers (IDCs) as particularly appealing investments due to their considerable undervaluation and potential for performance enhancement.
Individuals looking to capitalize on the growing "computing power" ecosystem may find interest in specific ETFs that provide exposure to this burgeoning industryThe AI ETF (515070), for example, encompasses the entire AI value chain, focusing on foundational and generalized technologies—essentially the 'brain' behind AI innovations
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