[SINGAPORE] In early 2025, China’s Deepseek emerged as a significant player in the artificial intelligence (AI) sector, challenging the prevailing notion that Western countries held the upper hand in AI development. The firm, alongside other Chinese competitors, is now seen as a formidable contender in the race for AI supremacy, demonstrating capabilities that rival those of established U.S. companies.
According to KPMG, the Hangzhou-based startup’s open-source model is lauded for its performance, cost-effectiveness, accessibility, and transparency. JPMorgan‘s Alex Yao noted that large language models (LLMs) developed in China now offer performance levels comparable to top offerings from OpenAI and Google, while being available at significantly lower prices due to advances in model efficiency.
This surge of positivity surrounding Deepseek coincided with a pivotal meeting on February 17 between Chinese President Xi Jinping and key figures in the tech industry, including Deepseek founder Liang Wenfeng and Alibaba founder Jack Ma. This interaction was followed by a surge in Chinese tech stocks, reflecting renewed investor confidence.
The competitive landscape of AI in China extends beyond mere pricing strategies. Charles Yonts, head of Asian sustainability research at Macquarie Capital, emphasized that China’s open models represent a significant advancement in its competition with the U.S. He stated that while Chinese models lagged behind European and U.S. counterparts at the beginning of 2025, by August, downloads of Chinese open models had surpassed those from the U.S.
Yonts further explained that Chinese firms like Deepseek and Kimi are leading the way in open models, which are systems with publicly accessible code and architecture. These models are not only cheaper but also nearly on par with leading proprietary models from the U.S. He noted that these Chinese offerings continue to attract global developers, including those based in the United States.
In addition to market dynamics, the ambition of companies like Kimi, a chatbot developed by Beijing-based Moonshot AI, aims to achieve “artificial generative intelligence,” striving to reach or exceed human-level intelligence, according to co-founder Yang Zhilin. By December 2025, China’s open-source models captured 30% of international usage, a significant increase from a mere 1.2% in late 2024, with notable contributions from Alibaba’s Qwen and Deepseek.
However, proprietary Western models still dominate, claiming 70% of the global market share, with analysts pointing to the unmatched strength of U.S. products such as ChatGPT and Gemini. Despite this, Macquarie analysts project that China will invest approximately US$270 billion in data center infrastructure from 2026 to 2030, a move that could bolster its competitive edge.
The rise of Deepseek has also spotlighted other Chinese AI and robotics companies, collectively referred to as the “six little dragons,” which include Unitree Robotics, Deep Robotics, BrainCo, Manycore Tech, and Game Science. Eugene Hsiao, head of China autos and equity strategy at Macquarie Capital, highlighted that the resurgence of privately held advanced technology firms in China is noteworthy, particularly in the wake of Deepseek’s rise.
Looking ahead, experts expect Chinese policymakers to prioritize AI applications over core models, potentially leading to increased support for robotics-focused firms like Unitree and Deep Robotics. These companies are particularly invested in humanoid robot development, a domain that promises advancements toward “superintelligence.” Unitree recently launched the world’s first humanoid robot app store and has plans for an initial public offering on Shanghai’s Star Market.
The Chinese government’s initiatives to bolster AI development are further underscored by the creation of the Hangzhou AI Industry Chain High-Quality Development Action Plan, aimed at certifying over 2,000 high-tech enterprises and initiating more than 300 major tech projects with an annual investment exceeding 300 billion yuan (approximately S$54.9 billion).
The growing interest in China’s AI capabilities has influenced analysts’ perspectives on various tech companies within the nation. The so-called “Terrific 10,” reminiscent of the U.S. “Magnificent Seven,” includes giants like Alibaba and Tencent, both of which received “outperform” ratings from Macquarie analysts. Alibaba’s strong free cash flow from its domestic e-commerce business positions it well for aggressive investments in AI, while Tencent stands to gain from increased monetization opportunities across its vast social network of 1.3 billion users.
Despite some analysts expressing caution about stocks like Semiconductor Manufacturing International Corporation (SMIC) and Xiaomi, the outlook for the broader China and Hong Kong markets is optimistic for 2026, supported by favorable fiscal and monetary policies. However, geopolitical risks remain a potential source of volatility. Analysts maintain that companies like Tencent and Alibaba are largely insulated due to their domestically driven income streams, setting the stage for a dynamic future in China’s AI landscape.
See also
Holiverse Develops Groundbreaking Offline AI Device to Reinstate User Data Control
Midwest Communities Mobilize Against Surge of AI Data Center Proposals Amid Environmental Concerns
Mistral AI Deploys Voxtral Models on Amazon SageMaker with Advanced Multimodal Capabilities
DXC Technology’s AdvisoryX Group: A Strategic Shift to Enhance AI Execution and Revenue Growth
Shelley from Character.AI Shares Insights on Creative Writing and Prompt Engineering
