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Asian technology stocks experienced a decline on Monday amid worries regarding global artificial intelligence investments, particularly in light of developments from the Chinese start-up DeepSeek.
Japanese semiconductor firms Disco Corp and Advantest, which partners with Nvidia, saw drops of 2.6% and 8.8%, respectively, while China’s top chip manufacturer, SMIC, fell by 2.9%. US pre-market trading suggested Nvidia, a major player in AI technology, was set to open lower compared to its previous close.
These stock declines followed the unexpected launch of DeepSeek’s R1 model, which competes with OpenAI’s ChatGPT generative AI. This development has raised questions over the substantial capital expenditure on AI in Silicon Valley and the US’s continued technological advantage in the field.
Venture capital expert Marc Andreessen remarked on social media that the release of DeepSeek R1 was reminiscent of the Soviet Union’s launch of Sputnik, signaling a significant point in technological competition. DeepSeek’s application topped the App Store charts in the US, and the startup has claimed to develop competitive models without large-scale funding, challenging the notion that vast investments are necessary for AI model training.
Analysts have noted a growing realization that China has been making strides in high-end technology, despite ongoing tariffs and restrictions on tech investments. According to Mitul Kotecha from Barclays, this has taken many observers by surprise and is influencing current market sentiment.
In Hong Kong, the Hang Seng index rose by 0.9% during early afternoon trading, buoyed by Chinese tech firms such as Tencent and Alibaba, while AI company iFlytek gained 1.75%. In Tokyo, the sell-off targeted stocks that had benefitted from the AI boom, including Tokyo Electron and Fujikura, which had seen significant gains in recent months.
Market insiders indicated that the drop in Japanese tech equities was due to a reevaluation of hardware spending on AI, with some suggesting that estimates may be overly optimistic. Furukawa Electric, known for its data center cabling, saw its shares plunge by over 11.3%, becoming the largest loser on the Nikkei 225.
Traders at major Japanese brokerages expressed uncertainty about the duration of this downturn and whether it marked the beginning of a wider market sell-off. As Tokyo’s markets anticipated a similar trend to the US, some investors were using the news surrounding DeepSeek as an opportunity to secure profits from stocks that had been doing well this year.
Overall, the broader impact of falling tech stocks was felt in Japanese markets, although the Topix select index showed an increase, responding to the Bank of Japan’s recent interest rate hike of 0.25%. Japan’s three largest banks—MUFG, SMFG, and Mizuho—each rose about 1% on prospects that higher rates would bolster their domestic earnings.
photo credit: www.ft.com
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