The AI—open-source, powerful, and relatively cheap—upended pessimistic narratives about China’s tech sector. Combined with a belief that Beijing is ready to support the private sector, exemplified by a meeting between Xi Jinping and leading tech executives on Monday, investors now think that China’s ready for a new tech rally. 

The Hang Seng Tech Index, which tracks technology companies listed in the Chinese city of Hong Kong, is up 34% since the beginning of the year. By comparison, the Nasdaq-100 is up only 5.2% over the same period. 

China’s private sector has embraced DeepSeek, integrating the model into their products and services. Even China’s government officials are buying the hype: The Communist Party chief in Zhengzhou, the capital of Henan province, called on city officials to “deeply study and master the use of AI models such as DeepSeek” and use AI to support decision-making, according to the South China Morning Post.

China’s tech earnings this week now give an early glimpse into how its tech CEOs are thinking about DeepSeek.

Baidu: An early mover suddenly under threat

Baidu, which operates China’s leading search engine, reported 34.1 billion yuan ($4.7 billion) in revenue for the final quarter of 2024, a 2% drop from the year before. Still, the company’s cloud revenue jumped by 26% over the same period, showing strength in generative AI even as its other businesses, like advertising, struggle in China’s relatively weak economy. 

The Chinese tech company was one of the country’s first movers on generative AI, releasing its own LLM-powered chatbot, ERNIE Bot, in 2023, just a few months after OpenAI’s ChatGPT. But years later, Baidu now faces challengers.

Last week, Baidu made several surprise moves, including pledging to release a new version of its ERNIE model later this year, making ERNIE Bot free for users, and promising to make its AI models open-source. 

“One thing we learned from DeepSeek is that open-sourcing the best models can greatly help adoption,” Baidu CEO Robin Li told analysts on Tuesday. “When the model is open-source, people naturally want to try it out of curiosity.”

That makes Baidu one of the first big AI developers to pivot to an open-source approach in the wake of DeepSeek. Up to now, most leading AI developers, including OpenAI, have invested in a proprietary model. But DeepSeek’s open-source success is forcing people to rethink that approach. “We have been on the wrong side of history here,” OpenAI CEO Sam Altman wrote on Reddit earlier this year.

Investors are more uneasy: Baidu shares are down 7.6% for the week. The Chinese tech company has only posted an 11% gain for the year thus far.

Alibaba: A big bet on AI pays off

E-commerce giant Alibaba has been front and center in China’s tech scene this week, starting with founder Jack Ma’s presence at Monday’s meeting with President Xi Jinping.

Alibaba is a major AI player in its own right, with the open-source Qwen models. The e-commerce company released a new version of its model earlier this year, around the same time that DeepSeek was roiling markets. 

The company bet big on AI as its core e-commerce business floundered in China’s sluggish economy, and as the company dithered on an ambitious restructuring plan. 

The bet seems to have paid off. On Thursday, Alibaba reported 280.2 billion yuan ($38.3 billion) in revenue for the last quarter of 2024, an 8% increase year on year. The company’s cloud business grew by 13% over the same period, generating $4.3 billion in revenue. 

On an earnings call with analysts, CEO Eddie Wu was bullish about what AI can do for economic growth. “This is the kind of opportunity for industry transformation that really only comes about once every several decades,” he said, suggesting to analysts that AI could potentially replace as much as half of global GDP.

Wu defended Alibaba’s open-source strategy as a way to bring customers into its cloud ecosystem. When developers build a service on top of Alibaba’s Qwen, “it’s only natural that they will deploy … those applications on Alibaba Cloud because that’s the most efficient way to do it,” Wu said.

Alibaba’s Hong Kong–traded shares rose 14.5% on Friday, bringing total 2025 gains to over 70%.

Lenovo: DeepSeek matters for hardware too

DeepSeek’s more efficient model is also a boon for hardware developers, with PC maker Lenovo seeing it as proof that AI doesn’t always need to live entirely in the cloud.

Lenovo reported $18.8 billion in revenue for the last quarter of 2024, an increase of 20% and its third straight quarter of double-digit year-on-year growth. Revenue for its infrastructure division, which includes AI servers, grew by a whopping 60% year on year. 

The manufacturer is banking on what it calls “hybrid AI,” a combination of personal AI, enterprise AI, and AI based on the cloud. Lenovo also forecasts that AI PCs will make up 80% of the industry by 2027. 

DeepSeek “has a very positive impact for Lenovo,” CEO Yang Yuanqing told analysts on Thursday. “It further proves … that we have been on the right path by deploying distilled small models for local devices.”

Earlier this month, Lenovo announced that it would integrate DeepSeek’s model into its AI assistant, called Xiaotian. 

Yang also shrugged off concerns of new tariffs from the Trump administration, which has promised stiff duties on U.S. imports, particularly from China. 

Tariffs are “not new to Lenovo,” Yang said, pointing to similar protections in markets like India and Brazil. Protectionism is “probably an advantage for Lenovo,” he added, noting the company’s large and diverse manufacturing footprint. 

Lenovo jumped 15.5% on Friday, bringing its total gains for the year to almost 40%.