Investing.com -- JPMorgan analysts see opportunities in the semiconductor sector, highlighting potential bargains among European semi-cap equipment companies following the release of DeepSeek’s R1 AI model.

Despite investor concerns over the implications of DeepSeek’s efficiency-focused technology, the bank’s analysts argue this development could drive growth in the consumer AI market, benefiting the semiconductor space.

DeepSeek’s R1, developed by a Chinese company, has drawn attention for its ability to match the performance of ChatGPT using significantly lower computing resources.

JPM explains that the model can even run on notebook computers, and its AI assistant has topped Apple’s iPhone download charts.

JPMorgan notes that “DeepSeek’s highly efficient and lower resource-intensive AI model” has sparked questions about whether the AI investment cycle may be over-hyped.

However, the analysts suggest that DeepSeek’s success could positively impact semiconductor demand.

They explain, “If DeepSeek’s AI assistant that can run on low compute power notebooks and possibly smartphones takes off and takes AI to the consumer market, that would be a significantly positive scenario for semiconductor equipment.”

They add that the app’s popularity indicates “very significant initial consumer interest,” which could spur a consumer device upgrade cycle.

JPMorgan warns that the only bearish scenario would arise if enterprise adoption of highly efficient AI models leads to reduced AI chip revenues without corresponding growth in consumer markets.

Despite this risk, the analysts believe that any continued stock declines for European semiconductor equipment firms like ASML (AS: ASML ), ASMI, and VAT could present buying opportunities.

They maintain Overweight ratings on all three stocks, emphasizing that their outlook is supported by a potential recovery in the broader semiconductor cycle.