China's DeepSeek AI model has been disrupting the large language model (LLM) market by significantly lowering development costs, S&P Global Ratings said in a Monday report.
The breakthrough democratizes access to powerful LLMs, which benefits Chinese internet companies including those without access to advanced AI chips, the rating agency said.
S&P sees potential for significant upside in business risk among Chinese companies that further push for AI.
DeepSeek's availability on major cloud platforms like Alibaba Cloud and Amazon Web Services also points to rapid industry adoption, S&P said.
Meanwhile, the reduced computational needs of DeepSeek's LLMs could boost demand for less-advanced or domestically produced chips, benefiting Chinese companies like Huawei Technologies, the rating agency said.
DeepSeek's open-source model creates opportunities for startups to build superior services, but it also could cause disruption risks for tech giants, forcing them to further boost their AI functions, S&P said.
The rating agency expects internet companies like Alibaba Group Holding (HKG:9988) and Tencent Holdings (HKG:0700) to continue their large AI investments, with capital expenditures in 2025 and 2026 estimated to match 2024 levels.
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