Bank of America: DeepSeek is the "Alibaba IPO moment" of the Chinese stock market

DeepSeek's "shockwave" has a wide-ranging impact, with people considering its launch as the "Sputnik moment" in the AI field, but it seems more likely to be the "Alibaba IPO moment" for the Chinese stock market.

Bank of America pointed out in a report on February 12 that it could become a game changer in the AI landscape:

The "Holy Grail" of AI development in China may not necessarily be "best in class," but rather "good enough" to support large-scale AI applications in China and drive productivity and economic growth. DeepSeek may democratize computing and change the global AI ecosystem.

It is worth mentioning that Bank of America further compared the emergence of DeepSeek to Alibaba's initial public offering in 2014, believing it could become a turning point for the Chinese stock market:

Alibaba's IPO attracted long-term capital inflows from around the world into the Chinese market, promoting the development of the new economy. The emergence of DeepSeek, likened to Alibaba's 2014 IPO, may have a structurally positive impact on the Chinese stock market in the long run.

DeepSeek's Technological Breakthrough: The "Cost Revolution" of Chinese AI

DeepSeek became the focus with the launch of its R1, triggering a correction in U.S. tech stocks and a rebound in Chinese stocks.

The R1 inference model has achieved performance comparable to leading U.S. models while reducing reliance on high-end hardware, with training costs only a fraction of the latter. For example, it costs only $2.19 per million output tokens, while OpenAI's GPT-4 costs $60.

Bank of America believes:

Through a mixture of experts architecture (MoE), FP8 mixed precision training, and reinforcement learning techniques, R1 has achieved breakthroughs in inference efficiency, with API pricing only 2%-4% of GPT-4. This innovation not only challenges the consensus of "AI hegemony relying on massive hardware investment," but also proves that China can still promote AI inclusivity through software optimization despite limited computing power.

Bank of America also summarized the development of DeepSeek:

Technical highlights: The R1 model has only 37 billion active parameters, dynamically allocating computing resources and reducing reliance on high-end GPUs;

Market response: After its launch, R1 topped the free charts on the U.S. App Store, with downloads reaching 16 million in the first month, surpassing ChatGPT's performance during the same period;

Ecosystem integration: Leading global cloud service providers such as AWS, Microsoft Azure, Alibaba Cloud, and Tencent Cloud have integrated the R1 model.

Can DeepSeek Replicate Alibaba's "Structural Turning Point" in 2014?

Alibaba's listing in 2014 drove the rise of China's "new economy" sector, attracting long-term capital inflows from around the world. Bank of America Merrill Lynch believes that DeepSeek could become the "Alibaba IPO moment" for the current Chinese stock market, but caution is needed regarding the excessive reaction of short-term market sentiment.

Bank of America believes:

The emergence of DeepSeek can be likened to Alibaba's 2014 IPO, which may become a turning point for the Chinese stock market. Alibaba's IPO attracted long-term capital inflows into the Chinese market, promoting the development of the new economy. The technological breakthroughs of DeepSeek may attract more global capital attention to China's AI sector, driving long-term growth in the Chinese stock market.**

Bank of America emphasizes:

The "holy grail" of AI development in China is not necessarily "best in class," but rather "good enough" to support large-scale AI applications in China and drive productivity and economic growth. DeepSeek demonstrates that China's private sector still possesses innovation capabilities and competitiveness, and it also shows the potential for continued progress in the AI field in China.

Bank of America also believes that DeepSeek will change the global AI ecosystem:

The emergence of DeepSeek may alter the global AI ecosystem, promoting the democratization of AI technology and lowering the barriers to AI application. Through open-source models, DeepSeek provides global developers with more efficient and lower-cost AI solutions, facilitating the widespread application of AI technology.

DeepSeek Promotes Development Across Multiple Industries

Additionally, Bank of America points out that the emergence of DeepSeek will drive the development of multiple industries, including software, data, semiconductors, the internet, and electric vehicles.

Specifically:

• Software Industry: AI applications may accelerate penetration, and DeepSeek's open-source models lower the barriers to AI application, enabling more software companies to quickly integrate AI features, thus promoting the development of Software as a Service (SaaS) models.

• Data Centers: In the short term, the data center industry is limited in impact, as revenue growth for 2025 has already been locked in through previous orders. However, in the long term, the increasing demand for AI model training and inference will drive growth in data center demand. DeepSeek's technological advancements may further accelerate this trend.

• Semiconductor Industry: DeepSeek's technological advancements may accelerate the development of China's semiconductor industry, particularly in AI-accelerated chips and advanced packaging technologies. Market concerns about cloud vendors cutting capital expenditures are present, but Bank of America believes that demand has not been disproven and may benefit from the demand growth brought by DeepSeek.

• Internet Industry: DeepSeek's technological advancements may accelerate the application and development of AI among China's internet giants, enhancing their competitiveness in the global market. Internet giants like Alibaba, Tencent, and Baidu have already made significant investments in the AI field and are expected to further enhance their AI capabilities through DeepSeek's technology.

• Automotive and Electric Vehicle Industry: DeepSeek's technology may accelerate the development of autonomous driving technology and enhance the interactive experience of smart vehicles