The ripples of DeepSeek's emergence are creating significant waves across capital markets, with effects that are being felt on a global scaleIn the wake of these developments, major players in the U.S. stock market, particularly those within the semiconductor sector, have faced considerable price adjustmentsHowever, amidst this turbulence, Chinese concept stocks have emerged as a vital buoy for the U.S. market in 2024.

According to data collected by Wind, as of February 7, the performance of Chinese tech stocks has outshone other major sectors on the U.S. stock exchangeThe Wind Zhongguancun Tech Index, the Wind China Concept Stocks 100, and the NASDAQ Golden Dragon China Index have recorded impressive gains of 12.22%, 11.16%, and 8.3%, respectivelyNotably, the latter two indexes contain a high degree of overlap in their constituent stocks, while the technology giant's index for major U.S. corporations reported a downturn of 1.94%—the worst overall performance in the market.

As the financial landscape continues to evolve, certain Chinese concept stocks, particularly those intertwined with the artificial intelligence (AI) narrative, have garnered significant attentionDespite the initial turbulence on January 27, triggered by varying impacts from DeepSeek-related news, these stocks have exhibited a degree of resilience, with a market correction leading to recovery rather than a prolonged negative outlook.

Among Chinese stocks benefiting from DeepSeek's momentum, companies linked to AI have been particularly prominentFuelling investor enthusiasm, Xiaomi Group, BYD Company, and Alibaba have each seen their stock prices surge by over 20% this year alone.

Dominated by Internet titans, the leading stocks in the Chinese concept sector primarily offer AI-related cloud services or applications, although this influence is not overtly reflected in their respective market performancesFor instance, Xiaomi's stocks began a steep ascent on January 24, and Alibaba's stocks reached their peak since November 2024 following events at the end of January.

Conversely, the NASDAQ Golden Dragon China Index witnessed substantial gains among its top five constituents this year, with AI-driven companies leading the charge

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Noteworthy performers include Tuya Smart, Century Internet, Kingsoft Cloud, and Agora, boasting gains of 96.65%, 89.45%, 61.58%, and 48.08%, respectivelyRemarkably, three of these companies are heavily embedded in AI applications, with Century Internet positioned as a third-party data center (IDC) provider and Kingsoft Cloud focusing on infrastructure and applications.

The trajectory of Tuya Smart's stock began to rise around January 13, experiencing two separate single-day surges exceeding 20% on February 4 and February 6. Kingsoft Cloud exhibited similar behavior, further validating the AI trend's impactNotably, Century Internet's stock had languished for years but recently surged to $9 per share for the first time since January 2020, indicating the highest price point in nearly five years.

The latest financial report from Century Internet for the third quarter of fiscal year 2024 revealed that a staggering 90% of their demand orders stemmed from AI servicesTheir major offerings encompass managed services (IDC), cloud services, and VPN services.

On a parallel front, Tuya Smart disclosed that it had approximately 2,200 IoT Platform as a Service (PaaS) clients during its third fiscal quarter, with PaaS contributing a remarkable 71% of the company's total revenueNotably, Tuya showcased various AI products at CES in January, including hardware and AI Agent applications.

Kingsoft Cloud's financial performance also illustrated a year-on-year gross revenue increase of 16%, driven primarily by the rising incomes generated from Xiaomi, Kingsoft's ecosystem partners, and AI-related clientele, notwithstanding a voluntary reduction in lower-margin content distribution network (CDN) services.

Agora, the provider behind the Agora platform, operates a dual entity with deep ties in the U.S. and China, focusing on PaaS servicesIn October 2024, Agora announced its collaboration with OpenAI's Realtime API, deploying a real-time dialogue-based AI SDK.

At present, these companies have yet to publish new quarterly results, making it difficult to ascertain AI's more substantial driving force behind their financial outcomes; however, one can reasonably speculate that the current AI wave plays a non-negligible role.

In stark contrast to the performance of Chinese concept stocks, major U.S. tech firms are experiencing short-term market fragmentation, with an overall decline in market capitalization among many players

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According to statistics from Wind, among the so-called "Big Seven" U.S. technology companies, only Meta and Amazon saw stock price increases year-to-date, reflecting gains of 21.99% and 4.44%, respectivelyContrarily, Tesla, Apple, and NVIDIA recorded declines of 10.49%, 9.07%, and 3.31%, respectively.

The market reacted intensely on January 27, witnessing the onset of what has been described as the "DeepSeek effect," which subsequently cascaded through global markets, placing substantial pressure on leading semiconductor manufacturersThe GPU titan NVIDIA saw its stock plummet by 16.97% on that day, while other significant players like Broadcom and Marvell followed suit, with declines of 17.4% and 19.1%, respectively.

This could largely be attributed to market fears that an abrupt decrease in AI inference costs following DeepSeek's announcement indicated that fewer AI chips would be necessaryHowever, soon after, the market began to correct itself, acknowledging that both the ongoing Scaling Law trend and the continuing growth in computational power for AI inference applications would still sustain demand for AI chipsSubsequently, these chip manufacturers found some reprieve as their stock prices rebounded.

The discourse surrounding a potential investment bubble for NVIDIA and AI chips began to emerge toward the end of 2024, suggesting that the market's adjustment, triggered by recent external news, is a natural and expected recalibration.

As it stands, among the "Big Seven," only NVIDIA has yet to release its quarterly results, while the other firms have generally seen declines, some attributed to subpar performance or outlook post-earnings.

Microsoft's stock slipped 6.18% following its earnings announcement on January 29; Alphabet (Google) experienced a 6.94% drop after its fiscal report on February 4; and Amazon's stock fell 4.05% the day after its earnings releaseIn contrast, Apple, Meta, and Tesla saw varied degrees of increases in their stock prices post earnings.

Furthermore, amid the other "Big Seven" firms, Meta has distinguished itself as the highest performer year-to-date while simultaneously positioning itself as a significant player in the open-source large model space

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