On February 17, Tencent Holdings (00700.HK) saw its stock price soar over 5% during intraday trading, crossing the 500 Hong Kong dollars (HKD) mark per shareBy the time of writing, the increase had dipped slightly to 4.25%, with the stock valued at 495 HKD per shareThis rise comes after Tencent and Baidu made announcements regarding the integration of DeepSeek into their products, although Baidu's stock experienced a significant drop of over 6.78% on the same day.

The fluctuations in Tencent's share price began around mid-January, rising from 366 HKD per share on January 13 to a closing price of 474.8 HKD on February 14. In comparison, Tencent's stock reached an all-time high of 700 HKD in February 2021. Additionally, several Tencent-related stocks have also moved upwards, with Weimob Group (02013.HK) gaining more than 10%, and both China Literature Limited (00772.HK) and Youzan (08083.HK) seeing increases of over 3% during the session.

In terms of developments, Tencent's WeChat has integrated AI search capabilities through DeepSeek-R1, with functionalities currently undergoing gray testingTencent representatives stated that while utilizing its advanced large model to enhance AI search, WeChat's search function is now incorporating DeepSeek, allowing select users to access the full version of DeepSeek-R1 for free in the testing phaseIt is important to note that this AI search solely integrates information from public accounts and other publicly available internet resources, excluding the use of personal user data or private information.

On the same morning, Tencent Docs also announced the formal integration of the DeepSeek-R1 model, which can directly generate documents, spreadsheets, presentations, and mind mapsAdditionally, automotive giant Toyota's collaboration with Tencent Cloud successfully brought DeepSeek into its operational frameworkOther Tencent products, such as the Tencent Cloud AI Code Assistant and the Tencent Yuanbao app, had previously adopted the DeepSeek model as well

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A research report from UBS highlighted that the gradual adoption of DeepSeek across Tencent's product offerings could drive incremental traffic to their content, subsequently promoting the development of WeChat's AI solutions.

Tencent operates both as a developer and an application provider of large modelsBesides implementing the open-source DeepSeek-R1, the company also has its proprietary development named HunyuanDuring a company-wide meeting in January, Tencent's CEO and Chairman, Ma Huateng, expressed his aspiration for all business units to fully embrace the realization of large model productsThis includes plans for products such as WeChat, QQ, the input method, and the browser to roll out AI resources, along with deeper explorations in gaming, WeChat Reading, and Tencent Video, which will all utilize Hunyuan technologies.

Several experts in the AI field have informed reporters that DeepSeek-R1's performance is comparable to OpenAI's latest model, hinting at robust prospects for AI applications this yearHowever, the rapid growth of open-source tools poses significant challenges to some proprietary model providers, as the competition intensifies.

The increasing attention towards DeepSeek has stirred sentiments in the financial market, leading to a reevaluation of Chinese assetsMultiple institutions have recently discussed the notion of repricing within the context of Chinese assets.

On February 16, CICC (China International Capital Corporation) released a report stating that the Hong Kong stock market had maintained its strength following the Spring Festival, experiencing a 7.3% surge in the Hang Seng Tech Index, which surpassed the highs of October last year and reached its peak since early 2022, with the Hang Seng Index also climbing by 7.0%. The report suggests that this rebound is fundamentally rooted in optimistic sentiment about technological trends and that the primary catalyst for this substantial rise is the breakthrough of DeepSeek, driving reevaluation of technology stocks and overall Chinese assets

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If other sectors maintain their sentiment, the optimistic outlook for technology could push the Hang Seng Index to around 24,000 points in early 2023.

A recent research strategy report from Deutsche Bank highlighted that the year 2025 will be pivotal for global investors to reassess China's international competitivenessChinese firms continue to build dual advantages in price and quality within the high-end manufacturing and service sectors, with the nation’s disruptive innovation reshaping the industrial competitive landscapeMeanwhile, Goldman Sachs pointed out that the emergence of DeepSeek presents a mid- to long-term reevaluation opportunity for Chinese technology stocksGoldman Sachs reiterated its overweight rating for the MSCI China Index, projecting a 14% increase for the index this year.

A report from Minsheng Securities mentioned that the global market has recently emphasized the reevaluation of Chinese assets sparked by DeepSeek's introductionFollowing the launch of DeepSeek, Chinese tech assets have become a global focal point, with the Hang Seng Technology Index emerging as a sought-after investment prospect in contrast to the valuations observed in U.S. and A-share tech stocksThere is already a discernible flow of capital transitioning from AI sectors towards broader Chinese assets within both the Hong Kong and U.S. stock markets.

On February 14, numerous U.S.-listed Chinese stocks experienced notable gainsAlibaba rose by 4.34%, Tencent Music climbed by 6.66%, and JD Group increased by 4.52%. In the Hong Kong market, apart from Tencent, other tech stocks also witnessed an uptick, such as Meituan-W, which saw an increase of 1.12%, and Kuaishou-W, which gained 0.19%. However, as a major player in the search engine domain, Baidu announced the comprehensive integration of DeepSeek and its Wencan intelligent platform with search functions yesterday, yet the Baidu Group saw its stock price decline by 6.78% in subsequent trading.

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