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In the ever-evolving world of finance, stock volatility is a double-edged sword, offering both immense opportunities and considerable risksRecently, a surge in stocks tied to a new and innovative concept in artificial intelligence and machine learning has set the market abuzzThis surge, however, was short-lived, with the inevitable consequences of profit-taking, particularly from major shareholders, creating a sudden downturnThis situation has sparked considerable debate among investors, analysts, and financial commentators alike.
The catalyst for this market shift came on February 13, when stocks associated with DeepSeek—a concept that has captivated the attention of tech investors—suffered a sharp declineFor a period, companies such as Qingyun Technology and Paralle Tech were riding high on the excitement generated by the latest AI trends, experiencing stock price increases that reached previously unseen levelsHowever, these same companies soon found themselves in the midst of a significant market pullback, with stock prices plummeting by over 10% in some casesThe ripple effect was felt across the sector, with other companies, including Zheshu Culture and Meg Intelligent, hitting their trading limits, a clear indicator of intense selling pressure.
The series of events that unfolded illustrates how quickly market enthusiasm can turn into disillusionment, especially when investors are faced with a discrepancy between soaring stock prices and the underlying financial realities of the companies involvedThis phenomenon is not new to the world of finance, where speculative bubbles often inflate quickly, only to burst just as rapidly when the fundamentals fail to support the inflated expectations.
The underlying cause of the pullback can be traced to the actions of significant shareholders who saw an opportunity to capitalize on the rapid price increases and liquidated their holdingsSuch behavior is not uncommon in the world of stock trading, particularly when major players look to minimize their exposure to risk during times of high volatility
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Many of these investors, especially those holding over 5% of a company's shares, chose to cash in on the escalating prices, contributing to the downward pressure on stock prices.
One of the key events that signaled the impending downturn occurred on the evening of February 12, when Qingyun Technology made a public disclosure regarding the reduction of holdings by some of its major investorsThe company revealed that Jiaxing Lanchifan Investment Partnership and Tianjin Lanchi Newhe Investment Center, which collectively held significant shares, had sold off a portion of their holdingsBetween February 6 and 10, Jiaxing Lanchifan sold more than 113,000 shares, followed by an additional 379,000 shares over the next two days, totaling 621,300 sharesThis sale amounted to over ¥45 million at the prevailing share price, signaling a retreat from what had been a seemingly unstoppable rally.
Despite the stock price surge—Qingyun Technology’s shares had risen from ¥34.07 to ¥101.72 within a matter of days—investors began to question the sustainability of these increasesThe company's own projections were less than optimistic, as it revealed a forecasted net loss of ¥97.9 million for the year 2024. This contrast between the soaring stock prices and the company’s financial outlook highlighted the disconnect between market sentiment and actual business performanceIt was becoming increasingly clear that the excitement around DeepSeek stocks was driven more by speculation than by solid operational achievements or revenue growth.
This situation was not unique to Qingyun TechnologyOther companies within the DeepSeek ecosystem faced similar investor activityParalle Tech, for example, disclosed on February 11 that it had experienced a significant sell-off, with a major shareholder offloading over 1.16 million shares between January 23 and February 11. This sale generated nearly ¥98.2 million in liquidity, but it also signaled the beginning of a downward trend for the stock, which had reached a peak prior to the sell-off.
As these events unfolded, the market began to scrutinize the so-called “DeepSeek concept stocks,” with investors increasingly questioning the substance behind the hype
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Initially, the term “DeepSeek” had evoked excitement, particularly following the Lunar New Year, when investors looked for new avenues to explore in the tech sectorHowever, as the dust settled, it became evident that many of the companies jumping on the DeepSeek bandwagon had only superficial ties to the technologyDeepSeek itself is an open-source large language model that enables developers to customize its capabilities for various applicationsHowever, the vast majority of companies that had invested in this area were merely using the technology without any substantial commitment or formal partnership with the creators of DeepSeek.
This revelation prompted 25 publicly listed companies to clarify their positions regarding DeepSeek, with most of them admitting that their involvement was limited to utilizing the open-source model rather than engaging in any formal business relationshipsFor instance, Qingyun Technology confirmed that while it had incorporated DeepSeek into some of its products, there was no formal partnership in placeSimilarly, Zheshu Culture stated that it had no direct or indirect shareholding in the DeepSeek projectLongsoft Technology, another company within the sector, noted that while it had integrated DeepSeek technology into its products, it was still in the early stages of research and development and had not yet seen any significant financial returns.
This entire episode serves as a cautionary tale about the dangers of speculative investment, particularly in the rapidly evolving tech sectorIt highlights how quickly excitement can turn into disillusionment when the speculative fervor surrounding a new technology or concept fails to match the reality of its financial potentialAs stocks soared on the back of optimism about DeepSeek, investors failed to adequately consider the lack of tangible business outcomes and financial returns associated with many of the companies in question.
Looking forward, the response of the market to future developments surrounding DeepSeek will depend on a more nuanced understanding of both the technology itself and the practical implementations of it in business
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