Who Are China's AI Winners Post-DeepSeek? Goldman Sachs Picks 30 Firms

Moomoo News Global joined discussion · Feb 18 21:44

Chinese assets are on a rapid rebound following the January 20 release of DeepSeek's R1 model. Since February, the $Hang Seng TECH Index (800700.HK)$ has jumped more than 19%, while the $NASDAQ Golden Dragon China (.HXC.US)$ has climbed over 11%.

Wall Street banks have issued optimistic reports on Chinese tech stocks, signaling potential revaluation.

Goldman Sachs analyst Kinger Lau published a report titled “AI Changes the Game” on Monday. The report highlights that models like DeepSeek-R1 are altering global views on China's tech progress, boosting investor confidence in AI-driven growth and economic returns.

Based on potential gains from AI, Goldman Sachs has raised its 12-month target price for MSCI China from 75 to 85, indicating a 16% rise from current levels.

In the long term, Goldman Sachs anticipates that AI could enhance Chinese corporate earnings by 2.5% annually over the next decade by increasing productivity, reducing costs, and creating new revenue opportunities.

Valuation Lift

Goldman suggests AI benefits could raise MSCI China's fair PE ratio from 11 to 12-13 times.

Since ChatGPT's launch, the Mag7's market cap has more than doubled from $6.8 trillion to $17 trillion, with the PE ratio rising from 22.9 to 31.4 times. Currently, China's AI tech sector, encompassing 2,235 companies, has a market cap of $6 trillion and a PE ratio of 17.8 times.

Who Are China's AI Winners Post-DeepSeek? Goldman Sachs Picks 30 Firms

China's top 10 AI firms, including $Tencent (TCEHY.US)$, $Alibaba (BABA.US)$, and $JD.com (JD.US)$, have an average expected 2025 PE ratio of 17 times, versus 42 times for U.S. tech giants.

Investment Insights

Goldman is optimistic about data and cloud, software and applications potentially becoming the next investment hotspots, as the AI spending cycle slows while the creation and commercialization of AI applications accelerate.

Goldman's “GS Select China AI Portfolio” features 30 "buy" rated firms across AI's lifecycle, with 22 listed in the U.S. and Hong Kong market:

– Data and Cloud: $TENCENT (00700.HK)$, $Alibaba (BABA.US)$, $PDD Holdings (PDD.US)$, $JD.com (JD.US)$, $Baidu (BIDU.US)$, $KUAISHOU-W (01024.HK)$, $New Oriental (EDU.US)$, $TAL Education (TAL.US)$, $Bilibili (BILI.US)$

– Software: $MEITUAN-W (03690.HK)$, $NetEase (NTES.US)$, $Trip.com (TCOM.US)$, $Li Auto (LI.US)$, $Yum China (YUMC.US)$, $JD HEALTH (06618.HK)$

– Infrastructure: $XIAOMI-W (01810.HK)$

– Revenue Drivers: $PING AN (02318.HK)$, $ANTA SPORTS (02020.HK)$, $BOSIDENG (03998.HK)$

– Productivity Boosters: $KE Holdings (BEKE.US)$, $TONGCHENGTRAVEL (00780.HK)$, $CICC (03908.HK)$

Goldman Sachs notes that current AI-related risks, such as data privacy, industry regulation, and technology export controls, have not been sufficiently recognized by the market. These factors could significantly impact the performance and revaluation of AI themes.

Source: Goldman Sachs

by moomoo News Olivia

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