Chinese investors are flocking to AI-related stocks, betting that the success of home-grown startup DeepSeek will propel China to the forefront of the AI race amid the escalating Sino-US technology conflict. DeepSeek's breakthrough in developing a competitive large language model, cheaper to produce than those of US giants like OpenAI, has ignited a surge in investments, particularly in Chinese chipmakers, software companies, and data centre operators. This patriotic investment surge follows US President Donald Trump's fresh tariffs and trade war tactics.

Shares in AI, semiconductor, and robotics firms in China and Hong Kong have seen notable increases, with the Hang Seng AI Index rising by more than 5% and related sectors climbing over 11%. Investors are optimistic about the rapid adoption of AI technologies, with industry experts predicting significant growth in AI applications by 2025. Companies such as Nancal Technology and Suzhou MedicalSystem Technology are seen as likely beneficiaries of the AI boom.

The rise of DeepSeek has also sparked discussions about the undervaluation of Chinese tech stocks compared to their US counterparts. Chinese stocks are trading at much lower price-to-earnings ratios, and analysts believe AI breakthroughs could help close this gap. While US export restrictions on Chinese tech could intensify, this may prompt further government support, driving faster growth in the AI sector.

However, not all investors are entirely convinced. Some remain cautious about the long-term profitability of AI-focused companies, with concerns that many are still far from turning a profit. Despite the optimism, the future of AI investments in China remains a delicate balancing act between technological innovation and market realities.