AI Adoption To Draw Upto $200B in Chinese Equities, Goldman Sachs Forecasts. EPS To Rise By 2.5% Annually Over The Next Ten Years - Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN)

Goldman Sachs predicts a substantial rise in Chinese stocks due to the rapid implementation of artificial intelligence (AI) technologies such as DeepSeek.

What Happened: Goldman Sachs analysts Kinger Kau, Timothy Moe, Si Fu, and Kevin Wong revealed that the bank has revised its MSCI China Index target from 75 to 85, indicating a 16% upside over the next year, according to a report by Bloomberg. The bank forecasts that Chinese stocks will draw around $200 billion and increase by up to 19% in the next 12 months.

The bank also suggests that the broad adoption of AI could enhance Chinese companies’ earnings per share by nearly 2.5% annually over the next ten years. This is attributed to cost savings, productivity improvements, and the generation of new revenue streams enabled by these technologies.

Goldman Sachs also highlighted that the “Chinese AI story” might drive net buying and shift global asset managers away from their “conservative and underweight allocations” to Chinese equities.

Why It Matters: DeepSeek-R1 has gained attention globally for demonstrating capabilities on par with models from OpenAI, Google, and Anthropic — while maintaining significantly lower training costs.

Goldman Sachs’ prediction comes amid widespread discussions comparing the valuation of tech stocks, particularly the ‘Magnificent Seven’ — Apple Inc. AAPL, Amazon.com Inc. AMZN, Alphabet Inc. GOOG GOOGL, Meta Platforms Inc. META, Microsoft Corp. MSFT, Nvidia Corp. NVDA, and Tesla Inc. TSLA to that of Chinese equities. On Feb 6, Bloomberg data revealed that the 30 companies in the Hang Seng Tech Index had an average price-to-earnings ratio of 20.5 times, while the Mag 7 traded at an average of 41.4 times.

While the CEO of Trivariate Research, Adam Parker, recommended investors reduce their exposure to the "Magnificent Seven" stocks amid high valuation and related risks, Bridgewater Associates, a top hedge fund, has challenged the widespread belief that these stocks are overvalued.

Besides high valuations, Peter Oppenheimer, the Chief Global Equity Strategist at Goldman Sachs has previously expressed concerns over the high capex spending of the U.S. big tech companies. “..the extraordinary ramp-up in capex spending that mega-cap technology companies are making is reducing free cash flow and the scale of future profit growth,” cautioned Oppenheimer.

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