Chinese AI company, DeepSeek, launched R1, its open-source model that may match Openai's GPT-1 in terms of performance, but at a dramatically lower training cost of one-thirtieth of the training cost of GPT, sparking discussion about the need for large-scale, high-end GPUs, as R1 could offer a more cost-effective solution, Morgan Stanley issued a research report saying.

While Chinese data center operators face short-term uncertainty, the long-term outlook is positive. The broker believed that the adoption of DeepSeek's technology may reduce the need for AI model training, which would be more favorable to data center demand in first-tier markets.

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Therefore, Morgan Stanley was more bullish on GDS Holdings (GDS.US)      over VNET Group (VNET.US)      , although VNET Group, as a provider, will be able to directly benefit from the increased DeepSeek application usage volume.

Some software companies in China may also be slightly positively impacted by the lower cost of AI models, which may lower the barriers to integrating AI features into applications, but this will not directly improve monetization, as market demand is still facing challenges, the report added.

The broker expected that potential beneficiaries will include TUYA-W (02391.HK)  -0.590 (-3.261%)   , KINGSOFT OFFICE(688111.SH)  -3.090 (-1.329%)   , MEITU (01357.HK)  -0.090 (-2.041%)    Short selling $48.49M; Ratio 120.924%   and WEAVER NETWORK(603039.SH)  +0.610 (+1.379%)   .
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