Stocks of Chinese technology companies have been under pressure for a long time due to concerns about the country’s economy. However, more and more experts believe that an artificial intelligence (AI) model will be a game-changer for these companies. For example, shares of Alibaba Group Holding Ltd. rose rapidly last week on these expectations; the index tracking technology stocks in Hong Kong entered a “bull market” on Friday due to these developments. Jian Shi Cortesi, portfolio manager at Gam Investment Management (Zurich), says that interest in AI will help investors shift from “risk thinking to potential thinking” when evaluating major Chinese internet companies. Cortesi also points out that these companies are trading at significantly lower valuations compared to their U.S. counterparts. Recently announced financial results along with comments from company executives on AI models and demand for cloud services could be a positive catalyst for shares. Furthermore, options investors are increasing their interest in Chinese technology stocks. However, these shares are still considered quite cheap compared to the past. ● The Hang Seng Tech Index entered a bull market after a 9% increase last week. ● However, the index’s forward price-earnings (P/E) ratio remains below 17. ● This figure is below the Nasdaq 100 index’s 27 multiple and the Hang Seng Tech Index’s five-year average of 25. Some reasons for the low valuations of Chinese technology companies include insufficient consumer demand in the domestic market and intense competition both in e-commerce and cloud services. In addition, geopolitical tensions with the U.S. are undermining global investor appetite for Chinese shares. Alex Au, Managing Director of Alphalex Capital Management HK Ltd., says, “Lack of foreign investor interest and low market liquidity prevented these shares from showing their true value,” adding, “However, DeepSeek has largely changed the way international investors view Chinese technology companies and will help bridge the valuation gap.” After the sudden rise of DeepSeek, Alibaba announced that its own artificial intelligence model achieved even better results by introducing a new version. This announcement helped push the company’s Hong Kong shares up by 13% last week. In addition, companies like Tencent Holdings Ltd., Baidu Inc., and ByteDance Ltd. are offering AI models under different names such as “Hunyuan,” “Ernie Bot,” and “Doubao.” Newly developed artificial intelligence services can help both corporate companies and end-users adopt AI applications faster, reducing costs. This will benefit companies like Alibaba and Tencent operating in the cloud computing sector due to infrastructure needs. Alex Au from Alphalex Capital comments, “The introduction of DeepSeek’s much cheaper and stronger model will make AI more accessible in China and lead to an increase in both usage and spending,” adding, “This development will particularly delight companies offering cloud services (like Alibaba).” At present, cloud providers in China are lagging behind their U.S. counterparts. Analysts report that Alibaba’s cloud revenue in December grew by 9.7% compared to the previous year, while Baidu’s increased by 7.6%. During the same period, Amazon grew by 19% and Microsoft by 31%. Nonetheless, Chinese technology stocks are under pressure due to U.S. tariffs on e-commerce shipments and efforts to limit China’s access to the most advanced chips. However, the example of DeepSeek showed that the highest level of hardware may not always be required for artificial intelligence technology. Trading volume of options contracts on the Hang Seng Tech Index reached its highest level since the beginning of October on Friday. On that day, nearly 6,500 call options changed hands, while the number of put options remained at about half that level. The most popular options were the “June 6,000 call” contracts, which were 16% above the index’s current level. Richard Clode, portfolio manager at Janus Henderson, says, “Tencent and Alibaba have not been able to offer investors the long-awaited growth story for a long time,” adding, “But now a reassuring, strong player in the field of artificial intelligence has emerged, finally presenting an exciting new story.”