DeepSeek V4 Launch Signals Stronger Demand for China-Made AI Chips

DeepSeek’s recent launch of its V4 artificial intelligence (AI) model could prompt a re-evaluation of stocks across the industry. Analysts anticipate widespread impact, affecting companies from chipmakers to large language model developers.

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The breakthrough is poised to drive significant demand for computing power and foster broader commercial adoption of AI technologies.

The V4 series unveiling is a milestone for Hangzhou-based DeepSeek. The startup described its new model as the most powerful open-source platform, capable of challenging US rivals such as OpenAI and Anthropic.

DeepSeek stated that the model delivered top-tier performance in coding benchmarks. It also demonstrated significant advantages in reasoning and agentic tasks, affirming its advanced capabilities.

AI chipmakers, including Cambricon Technologies and Moore Threads Technology, are positioned to benefit from this progress. Increased demand for high-performance chips produced in mainland China is expected.

The launch may also reduce the costs of integrating AI into daily life, expanding commercial usage. This could potentially benefit AI firms such as MiniMax and Knowledge Atlas Technology, known as Zhipu.

Su Lingyao, an analyst at BOC International, stated DeepSeek’s V4 has lowered the entry barrier for using high-performance AI models. The model will offer more affordable AI capabilities to small and medium-sized enterprises, and even individuals.

Lingyao added that DeepSeek’s V4 is highly compatible with domestically made chips. This compatibility is expected to accelerate the commercialisation of AI computing power within China.

Brokerages identified other potential beneficiaries, including chipmakers such as Hygon Information Technology and MetaX Integrated Circuits. Fab operators, including Semiconductor Manufacturing International Corp (SMIC) and Hua Hong Semiconductor, were also mentioned.

China’s AI chip market could grow to 1.34 trillion yuan (USD 196.2 billion) in 2029, according to Guotai Haitong Securities. This represents a significant increase from 142.5 billion yuan in 2024.

The projected growth translates into an annual compound rate of 54%. The Star Market 50 Index of major technology stocks in Shanghai, where Cambricon and SMIC are listed, jumped 25% in April to approach a five-year high.

The index approached a five-year high, and Cambricon’s stock rose to a record high on Thursday. DeepSeek’s launch coincided with a renewed rally in US technology stocks.

The Nasdaq 100 index recovered all losses from the oil shock, hitting a record high last month. Investors are betting that earnings at major technology firms will be insulated from crude supply disruptions.

Continued investments in AI infrastructure by hyperscalers are also expected to bolster earnings at Asia’s chipmakers. Analysts noted that the V4 was optimised for domestic chips.

This optimisation could reinforce the model’s role within China’s technology stack, particularly under existing sanctions. DeepSeek was reportedly in discussions with Tencent Holdings and Alibaba Group Holding regarding its initial external funding round.

Morgan Stanley described Chinese models as efficient, delivering performance similar to US counterparts. These models achieve comparable results at only 15% to 20% of the inference costs.

The US bank also suggested that Chinese AI model companies, such as MiniMax, are undervalued given their growth prospects. Major players increased product prices from the second quarter to the first quarter.

This price adjustment was driven by performance improvements, indicating a shift from pure commoditisation to performance-based monetisation. Morgan Stanley believes these stocks could reshape Hong Kong’s stock market by attracting more inflows.

MiniMax and Zhipu are highly likely to join the Hang Seng Tech Index in June, with combined weightings between 5% and 7%. This inclusion could bring inflows of as much as USD 1.75 billion from passively managed funds, Morgan Stanley said.

These two stocks are expected to attract additional buying from mainland China investors. This would occur after their inclusion in the exchange link programme by August.

Purchases could amount to as much as a fifth of their free-float market capitalisations within six months of inclusion. Li Kefu, an analyst at Sinolink Securities, emphasised the significance of DeepSeek’s collaboration with domestic chipmakers.

Kefu highlighted that this partnership drives the coordinated development of hardware and software for large language models. It also accelerates self-controlled computing power domestically.

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• DeepSeek's V4 AI model is expected to boost demand for computing power and increase commercial AI adoption.

• The launch positions Chinese AI chipmakers and firms like Cambricon Technologies and MiniMax for significant growth.

• Analysts believe the V4 lowers the cost threshold for high-performance AI, making it accessible to smaller businesses and individuals.

Source: SCMP