HONG KONG, CHINA - JANUARY 28: In this photo illustration, the DeepSeek apps is seen on a phone in front of a flag of China on January 28, 2025 in Hong Kong, China.
DeepSeek's sudden splash in the large language model space has given China a powerful tool to catalyze artificial-intelligence adoption in the country and boost economic growth.
While Goldman Sachs pegs a 20-basis-point to 30-basis-point boost to China's GDP over the long term — by 2030 — it expects the country's economy to start reflecting the positive impact of AI adoption from next year itself as AI-driven automation improves productivity.
"The recent emergence of DeepSeek ... suggests faster AI development and adoption in China than we previously anticipated," economists at the Wall Street bank said.
The enthusiasm around DeepSeek is also being reflected in the sharp rally in China stocks, with the MSCI China index soaring over 21% from its January low, according to LSEG data.
The startup's rise is triggering a reassessment of China's "investability" after an extended period of limited attention, Morgan Stanley said in a note this week.
"DeepSeek demonstrates that China is at or near the cutting edge of AI development, which boosts the prestige of China's economy and tech ecosystem, making them more attractive for global investors," said Gabriel Wildau, managing director at Teneo.
The company's launch of a cheaper and more efficient AI model came as a timely confidence boost as the Chinese leadership faces a prolonged economic gloom, partly owed to the slump in its property market, while the specter of a fierce trade war with the U.S. looms large.
DeepSeek's R-1 reasoning model has been lauded as being able to match, or even outperform, leading global AI offerings amid claims of running on cheaper and less sophisticated chips. The open-source model also can be repurposed by developers outside the company to significantly boost efficiency at a lower operating costs.
The startup has shaken China's AI ecosystem as well, with state-owned entities as well as large tech players, including competitors, leveraging its open-sourced architecture.
"The scale and speed of [AI] adoption [in China] is amazingly fast right now, and it's not slowing down," said Wei Sun, principal analyst of artificial intelligence at Counterpoint Research.