The landscape of China’s stock market is undergoing a major transformation, driven by the rapid adoption of AI-powered trading tools like DeepSeek. Once viewed with skepticism, quantitative trading is now gaining widespread acceptance among retail investors. With increasing access to AI-driven investment strategies, individual traders are reshaping the $700 billion hedge fund industry.
The Rise of AI Trading in China
A year ago, Chinese regulators cracked down on algorithm-driven trading, blaming quant funds for increasing market volatility. However, the tide has turned. Today, online courses teaching AI-powered trading strategies are thriving, and classrooms are packed with traders eager to harness technology to gain an edge.
At the heart of this shift is DeepSeek, an AI model developed by High-Flyer, a hedge fund based in Hangzhou. DeepSeek’s open-source capabilities allow retail investors to analyze companies, pick stocks, and even generate code for trading strategies. Unlike Western AI tools such as ChatGPT, which are restricted in China, DeepSeek is readily accessible and gaining government support.
Why Investors Are Betting on DeepSeek
For many traders, the appeal of AI-powered trading lies in its efficiency. Traditional methods of stock analysis can be time-consuming and subjective, but DeepSeek streamlines the process. “Using AI to pick stocks saves a lot of time,” said Wen Hao, a trader from Hangzhou. “You can even use it to generate trading algorithms.”
This growing enthusiasm for AI-driven trading has also influenced major financial institutions. Brokerages and wealth managers are rapidly integrating AI into their platforms to meet the demands of tech-savvy clients. Goldman Sachs recently reported that Chinese stocks had their best start to a year in history, with AI-driven trading playing a significant role in the rally.
The Changing Perception of Quant Trading
The adoption of AI has not only altered market dynamics but has also changed public opinion on quantitative trading. Previously, retail investors viewed quant funds as “bloodsuckers” that manipulated markets for profit. Now, many are embracing AI as an essential tool for competing in the financial markets.
The industry is seeing a surge in demand for training, with traders willing to pay hefty fees for AI investment courses. A recent workshop led by Mao Yuchun, the founder of Alpha Squared Capital, charged participants 15,800 yuan ($2,180) for a weekend session on AI-powered stock trading.
Challenges and Risks of AI Investing
Despite its advantages, AI-driven trading is not without risks. Larry Cao, principal analyst at FinAI Research, warns that over-reliance on AI models can be dangerous. “People trust AI more than financial advisors, which is likely misplaced trust at this stage,” he said.
Another potential issue is the risk of “herding behavior,” where too many traders follow the same AI-generated signals, leading to unpredictable market swings. While DeepSeek and other AI models have revolutionized investing, experts caution that human oversight is still necessary.
The Future of AI-Powered Investing in China
DeepSeek’s success signals a broader trend: the growing influence of AI in financial markets. As technology continues to evolve, Chinese investors are expected to rely even more on AI for decision-making.
“In the past, investors sought advice from wealth managers. Now, they turn to AI,” said Zhou Lefeng, president of Xiangcai Securities. With AI tools becoming more sophisticated, the future of investing in China may be largely dictated by machine learning and quantitative models.
