Equity Insights
Key Highlights:
- The emergence of reasoning AI models – like DeepSeek R1 – has shifted the AI landscape, enabling more advanced problem-solving capabilities and reducing the cost of compute. This should drive broader adoption and innovation globally
- China’s advances in AI-engineering optimisations, alongside scale advantages that support commercialisation potential, challenge US dominance of the AI investment narrative
- With falling AI compute costs having the potential to unlock higher-value applications, software firms stand to benefit. Separately, with expansive technology ecosystems and superapps, China and broader emerging Asia can scale and commercialise AI in ways not feasible in the West
Evolution of the AI story
The AI revolution is entering a new phase, with recent advances reducing the cost of AI compute and broadening access to the technology. This democratisation of AI is expected to unlock higher-value applications and accelerate enterprise adoption globally, setting the stage for new leaders in the AI investment narrative.
The emergence of cost-efficient AI models from China has shifted market dynamics, and we think further supports the case for software firms to lead the next stage of the AI investment cycle. Ultimately, it is this segment that will drive the integration of generative AI into products and solutions.
While the US remains a leader in foundational AI development, China’s engineering optimisations and scale advantages have positioned it as a key player in the next phase of AI growth. China and broader emerging Asia also present unique opportunities for scaling and commercialising the technology. With expansive technology ecosystems and superapps, the region is well positioned to leverage AI for consumer applications, potentially eroding the profitability edge held by US tech firms. This shift underscores the broader case for international diversification, even in the tech sector, which has long been dominated by the US.