China’s “DeepSeek” tech rebound

CHINA ADVISORY - Report 04 Mar 2025 by Andrew Collier

The success of DeepSeek along with Xi Jinping’s meeting with technology firms has caused a rally in Chinese tech stocks. DeepSeek’s ability to create a sophisticated AI engine with minimal chip hardware has been taken as sign of China’s ability to improve on western technology at a much lower price point—as we have seen in electric vehicles, autos and other manufactured goods. However, this focus on the supply of a good (AI) ignores the more troubling question of demand. Who is going to buy this technology and in what applications? I am skeptical that domestic or foreign demand will materialize at levels similar to what the U.S. achieved during the early years of the internet (as explored in the excellent book, "Chip War" by Chris Miller), or will be sufficient to sustain growth in China's economy, thus hampering the growth of China’s AI and technology in general.

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