“There is a tide in the affairs of men, which taken at the flood, leads on to fortune” or, as Shakespeare did not write, leads to irrelevance.
DeepSeek AI is perhaps one of those peak times. The current focus is on the cost efficiencies of DeepSeek when compared with the American versions of AI. The only thing certain here is that the prices of AI will fall, and that will most likely lead to a fall in the price of semiconductors.
The cost of AI and the semiconductors that drive it face inevitable downward pricing pressure. Recent reports identify the way China has turned AI toward tackling the problem of the advanced development of semiconductors. The US will undoubtedly copy this initiative. In any case, an AI-developed semiconductor has a significant impact on Taiwan Semiconductor Manufacturing Company (TSMC) and Nvidia. That is a challenge for investors seeking to ride the semiconductor rocket.
However, taking this a step further into the future will alter the structure of economic activity. Currently, entire industries are built around human programmers. Consultants from the big four are retained to develop complex software solutions for service delivery and tracking, deploying hundreds of man-hours.
We teach coding at school and snatch the best to develop the coding used for the diverse software applications that are supposed to drive the future.
See also: China’s Two Sessions set development directions
AI-assisted or augmented coding can develop code more quickly and efficiently and be bug-free than any human coder. At the ‘peak of the tide’ that led to the current AI pinnacle, those upper primary school coding classes may have become irrelevant.
So, what does this tidal peak in China with DeepSeek tell us about the path to fortune? It suggests that doing business in China is no longer business as usual. It indicates that the nature of competition in China has changed, and the challenge of that change is global. Doing business in China for Chinese customers is moving onto new ground. Competing with Chinese products in our domestic market will include many competitive components and challenges other than just price.
When Creative was founded by Sim Wong Hoo in 1981, it entered the unsophisticated Chinese market and overwhelmed it with its Sound Blaster cards, which smart coders developed.
See also: The wind beneath China’s wings — new productive forces
The rapid adoption of AI across manufacturing, production and development presents a global challenge to advanced and sophisticated products and services. China’s recent high-tech leaps include artificial suns, very high-speed trains and satellite networks using laser beam communication.
Businesses must cope with and manage this new environment while protecting existing margins and expanding competitively. Last week’s Singapore budget provision for digital transformation grants for SMEs recognises this need.
When President Xi Jinping talks of new productive forces, he is identifying a revolutionary change in the way business and manufacturing development is undertaken. His speech on Feb 17 to technology leaders confirmed this approach of nurturing new productive forces.
Technical outlook for the Shanghai market
The Shanghai Index continues to develop as a genuine trend breakout. Its steady rise is stable and sustainable, with a low level of volatility, as the market moves smoothly in the uptrend. Index activity is clustered in the values of the short-term group of averages in the Guppy Multiple Moving Average (GMMA) indicator.
The long-term averages shown in red have compressed and turned up. The compression indicates that many investors think the current market condition combines correct pricing with good value. The strength of the new trend is confirmed as the long-term GMMA begins to expand. This expansion shows strong investor buying, which is essential for any sustainable uptrend.
The lower edge of the short-term GMMA has moved above the upper edge of the long-term GMMA, which is bullish. A move above the long-term GMMA usually signals trend strength and continuity. The GMMA is used to understand the behaviour and character of the two groups of moving averages because it shows the level of confidence in the developing trend.
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Support and resistance features and trend line analysis provide the structure of the market and help set index objectives.
The Shanghai Index’s first significant barrier to a rising trend is not the value of the upper edge of the trading band. This resistance level is near 3,435. A breakout above this level hits the next resistance feature, which is at the value of the old uptrend line. This now acts as a second resistance feature.
The resistance relationship has changed because the position of the chart candles on the horizontal axis moves forward each day. If there were a very large index move on Feb 20, then the move would encounter the horizontal trading band level at 3,435 before it reached the value of the uptrend line. This has become a strong, bullish breakout environment.
Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for two decades. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a former national board member of the Australia-China Business Council. The writer owns China stock and index ETFs
