In a notable shift from last year’s government crackdown on computer-driven quantitative traders, Chinese mom-and-pop investors are now adopting the mantra, “If you cannot fight them, join them.” Retail traders are increasingly turning to artificial intelligence tools like DeepSeek, backed by quant fund High-Flyer, to gain an edge in the market. This trend is reshaping China’s $700 billion hedge fund industry and altering the perception of quant trading, which was once criticized for contributing to market unfairness and volatility.
AI Training Boom: Retail Investors Rush to Learn Quantitative Trading
Online crash courses and in-person training sessions have surged in popularity as retail traders seek to leverage AI for stock trading. In February, Hong Yangjun addressed a packed room of individual investors in Shanghai, emphasizing, “The future is the digital age, and AI will be vital.” Lecturers compared the stock market to a futuristic battlefield dominated by computers, reflecting the growing enthusiasm for AI-driven trading strategies.
This newfound enthusiasm contrasts sharply with the public outcry a year ago, when quant funds were labeled “bloodsuckers” by retail investors and targeted by regulators. However, the tide has turned, with investors now paying up to 15,800 yuan ($2,179.91) for weekend lectures on AI trading, such as those offered by Mao Yuchun, founder of Alpha Squared Capital.
DeepSeek’s Rise: A Game-Changer for Retail Investors
DeepSeek, a Chinese AI startup backed by Hangzhou-based hedge fund High-Flyer, has become a key player in this transformation. Its cost-efficient large language model has not only impressed Silicon Valley but also spurred a rally in Chinese stocks. Social media platforms are flooded with online courses teaching traders how to use DeepSeek to evaluate companies, pick stocks, and code trading strategies.
“Using quantitative tools to pick stocks saves a lot of time,” said Wen Hao, a Hangzhou-based trader who uses AI to determine optimal buying and selling times. “You can also use DeepSeek to write codes,” he added, highlighting the tool’s versatility.
Brokerages and Wealth Managers Adapt to AI-Driven Trends
The rapid adoption of AI tools like DeepSeek is prompting brokerages and wealth managers to integrate AI models into their platforms. Zhou Lefeng, president of Xiangcai Securities, noted, “In the future, Chinese investors will completely change the way they make investment decisions and place orders. Previously, clients would ask wealth managers for investment advice. Now they ask DeepSeek.”
Analysts point out that while U.S. fund giants like BlackRock and Renaissance Technologies have long used AI in investing, the emergence of DeepSeek’s open-sourced model offers unique opportunities for small asset managers and retail investors in China. Unlike ChatGPT, which is off-limits to Chinese users, DeepSeek is readily available and promoted by the Chinese government, further boosting its appeal.
Caution Amid Enthusiasm: Limits and Risks of AI in Trading
Despite the optimism, experts caution against over-reliance on AI models. Larry Cao, principal analyst at FinAI Research, noted, “People trust AI models more than they trust financial advisers, which is probably misplaced trust at least at this stage.” He warned of potential herding effects if many retail investors are trained to trade using the same signals, which could exacerbate market volatility.
Feng Ji, CEO of Baiont Quant, acknowledged that DeepSeek has changed public perception of quant fund managers. “I can feel strongly that the public are thinking twice about quant fund managers’ contributions to society,” he said. “We actually provide liquidity and make the market more efficient.”
A Sunny Start to 2025: AI Fuels Market Optimism
The growing adoption of AI tools has coincided with a strong start to the year for Chinese stocks, with the MSCI China index recording its best performance in history, according to Goldman Sachs. As brokerages race to integrate AI into their platforms, the market is witnessing a paradigm shift in how investment decisions are made.
While the long-term impact of AI on China’s retail-dominated stock market remains to be seen, one thing is clear: DeepSeek and similar tools are reshaping the landscape, offering both opportunities and challenges for investors navigating this new digital frontier.