Recent advancements in artificial intelligence (AI) technology in China, highlighted by DeepSeek, are set to enhance the profitability of the AI-focused financial sector by significantly lowering labor costs, according to UBS.
UBS financial analyst Craig Cao mentioned during a Wednesday webinar that for every 10 percent reduction in labor costs due to generative AI, the brokerage sector could experience an 8 percent rise in net profits, while the insurance sector might see a 13 percent increase.
The Swiss bank anticipates that the valuations of brokerage and insurance stocks could appreciate by up to 21 percent and 18 percent, respectively, within this year.
“AI is fundamentally transformative, particularly for jobs that heavily rely on [large language models],” stated Cao. “In comparison with other sectors, the financial industry continues to lead in language-driven roles.”
DeepSeek-R1, an open-source reasoning model launched by a startup in Hangzhou on January 20, has made significant impressions both in China and internationally, demonstrating capabilities on par with those from OpenAI, Anthropic, and Google, but at much lower training costs.
Cao added that although the current adoption rate of generative AI across various industries is below 10 percent, financial institutions represent as much as 37 percent of the total use cases expected in 2023 and 2024.
