* DeepSeek-V4 shows improvement but faces strong

competition from Kimi and Qwen, data shows

* Reaction muted as rapid AI advances, new entrants

expected

* China's push for AI self-reliance has taken market

spotlight

By Eduardo Baptista

BEIJING, April 27 (Reuters) - Market reaction to

DeepSeek's preview of its long-awaited next-generation

artificial intelligence model has so far been subdued compared

with the Chinese startup's outsized global breakthrough last

year after the launch of its low-cost AI models.

The release and overseas reception of DeepSeek-V3 and R1,

which the Hangzhou-based company said were trained with a

fraction of the computing power used by U.S. rivals, triggered a

global tech share selloff as investors questioned the logic

behind massive spending on AI infrastructure.

That moment was widely viewed by analysts as a "black swan"

event that forced a sudden repricing of assumptions about cost,

competition, and China's ability to innovate under U.S. chip

restrictions.

But the muted reaction so far to DeepSeek-V4, launched on

Friday, highlights how quickly those assumptions have shifted.

Markets and industries have grown accustomed to low-cost, highly

efficient models developed under computing constraints, reducing

the element of surprise.

"This announcement followed a rather predictable path," said

Lian Jye Su, chief analyst at Omdia, noting that advances in

model architectures and efficiency have since been widely

explored across industry and academia.

Benchmark data support that view. According to Artificial

Analysis, DeepSeek-V4 Pro shows significant improvement over

previous versions but overall ranks among leading open-weight

models rather than clearly surpassing rivals, with competitors

such as Kimi and Qwen narrowing the gap.

That contrasts with last year, when DeepSeek appeared to

leap ahead of domestic peers, driving rapid adoption in China

and amplifying its global impact.

Analysts say the earlier shock was driven by a convergence

of factors: lofty valuations of U.S. tech firms, expectations of

continued dominance by a handful of players, and the emergence

of a relatively unknown Chinese startup delivering unexpectedly

strong results.

Those conditions are no longer present.

"The expectation that new players will emerge is now baked

into valuations," Su said, adding that markets have become more

realistic about both the capabilities and limits of AI.

At the same time, competition within China has intensified,

with multiple firms releasing increasingly capable models,

eroding DeepSeek's relative lead.

On Monday, stock markets in South Korea and Taiwan hit new

highs, buoyed by broad optimism for AI-related stocks.

Alfredo Montufar-Helu, managing director at Ankura China

Advisors, said the significance of V4 lies less in market impact

and more in the U.S.-China race for tech supremacy.

He pointed to DeepSeek's adaptation of V4 to run best on

Huawei chips, as tightening U.S. export controls are designed to

cut off the Chinese market's access to cutting-edge U.S. chips

that power AI model development.

"The 'wow factor' was last year - that's already priced in,"

he said. "What matters now is whether China can continue

advancing on AI development, and potentially do so with its own

chips - the geopolitical implications would be significant."