DeepSeek and Trump Tariffs Shape Winners and Losers in China's Markets

Investors are gearing up to return to mainland China’s markets on Wednesday following an extended eight-day Lunar New Year holiday. The current landscape presents a mixture of excitement and caution, especially with the emergence of the Chinese artificial intelligence (AI) start-up DeepSeek, which is gaining significant attention on the global stage.

While the market outlook is uncertain due to ongoing tensions between the United States and China, analysts believe that technology companies, particularly those focusing on AI, are poised for growth. They expect these firms to benefit from the advancements made by DeepSeek. However, companies that are heavily reliant on exports, including those in sectors like textiles, home appliances, electronics, and chemicals, may experience difficulties and face downturns.

Given these circumstances, many investors may adopt a cautious approach as they await the outcomes of a critical discussion between US President Donald Trump and Chinese President Xi Jinping. This call is seen as pivotal in efforts to prevent a full-scale trade war between the two largest economies in the world.

“While technology firms are likely to attract significant interest from investors due to DeepSeek’s impressive developments, this surge in tech stocks alone may not guarantee a robust start for the broader market following the holiday,” expressed Ivan Li, a fund manager at Loyal Wealth Management in Shanghai. This statement reflects the broader hesitance of investors in the current environment.

DeepSeek, based in Hangzhou, made waves last month by unveiling two powerful new large language models. These were developed at a fraction of the cost and resource demands when compared to those created by American tech firms, showcasing performance capabilities that rival those of ChatGPT, the renowned AI chatbot from OpenAI.

The economic atmosphere became even more tumultuous when the Trump administration announced a 10 percent tariff on Chinese exports over the weekend. In response, Beijing retaliated by introducing its own tariffs, which include a 15 percent levy on US coal and liquefied natural gas, alongside a 10 percent tariff on several items like crude oil, agricultural machinery, high-emission vehicles, and pickup trucks.

Investors, AI, Tariffs, DeepSeek, Trade