Seek .(US:SKLTY)2025-06-16 03:16Investment Rating - The report provides a cautious outlook on the technology sector in Asia Pacific, particularly focusing on the developments surrounding DeepSeek's R2 model [7]. Core Insights - DeepSeek's R2 model is anticipated to redefine AI development, pricing, and reliance on domestic AI chip supply chains in China, serving as a potential catalyst for accelerating AI application deployment [1][2]. - The R2 model is expected to achieve significant advancements in multilingual reasoning and code generation, offering a hybrid model with lower power consumption and smaller parameter scale, while being cost-effective compared to its predecessor R1 [2][9]. - The model's efficiency is projected to lower computational requirements, facilitating AI commercialization and expanding total demand, potentially disrupting the AI market [2][10]. Summary by Sections R2 Model Overview - R2 represents the second major iteration of DeepSeek's reasoning model, promising improvements in multilingual reasoning and code generation, with a focus on efficiency and cost reduction [2][9]. - The model is designed to be multimodal, featuring enhanced visual capabilities and a significant reduction in operational costs compared to R1 [2][13]. Supply Chain Developments - The R2 model is supported by a robust ecosystem of Chinese companies, leveraging Huawei's Ascend 910B chip cluster for training, which signifies a shift towards a localized supply chain [3][17]. - DeepSeek aims to reduce dependency on external chip manufacturers, contrasting with the previous reliance on NVIDIA GPUs for training the R1 model [17][20]. Market Impact - The report suggests that DeepSeek's advancements will benefit local GPU, GDDR, and China's HBM sectors, indicating a positive outlook for these industries amidst a broader AI market recovery [20][22]. - The performance of DeepSeek's models, particularly in the context of increasing computational demands during inference, is expected to drive further innovation and resource allocation within the AI ecosystem [20][23]. Competitive Landscape - DeepSeek's approach emphasizes software-driven resource optimization rather than hardware dependency, which could lead to significant cost reductions and efficient training of large models [23][24]. - The report highlights the competitive pressure on NVIDIA from Huawei's Ascend chips, which are designed to match NVIDIA's performance while being domestically produced [17][20].