Japanese stock markets continued their decline on Tuesday, as technology stocks faced a second consecutive day of heavy selling, influenced by a sharp drop in Nvidia shares the previous night.
Recently, the Chinese AI startup DeepSeek has captured attention in Silicon Valley due to its notable advancements achieved with significantly less computing power compared to its American counterparts. Former President Donald Trump has referred to DeepSeek as a wake-up call for U.S. industries.
On Monday, Nvidia experienced a historic loss, shedding approximately $589 billion in market value amid concerns on Wall Street and Silicon Valley regarding DeepSeek’s potential to threaten U.S. dominance in artificial intelligence. This situation underscores the urgent need for substantial investments in AI infrastructure.
In early trading, Japan’s tech-heavy Nikkei 225 index fell about 1.5%, while the broader Topix index, which has a more domestic focus and less emphasis on tech exporters, remained relatively stable.
Shares of SoftBank Group were particularly affected, dropping over 5.2% in early trading and bringing the decline for the week to around 13%. Analysts noted that SoftBank’s stock was especially pressured by a 10% fall in Arm Holdings’ shares, the U.S.-listed chip design firm in which SoftBank holds an 88% stake.
Despite this week’s downturn, SoftBank shares are still more than 43% higher than they were back in August, according to Kirk Boodry, an analyst at Astris Advisory in Tokyo, highlighting the stock’s volatility. Boodry noted that while the current state looks negative, it is typical for SoftBank, viewing it as a part of its usual fluctuations. He maintains a “buy” rating on the company.
Last week, Masayoshi Son, founder of SoftBank, joined Trump for the announcement of the Stargate joint venture, which includes SoftBank, Oracle, and OpenAI. The initiative involves a $100 billion investment in data centers, with potential growth to $500 billion over four years.
The developments surrounding DeepSeek and its cost-effective AI model have led to speculation about whether the recent joint venture announcement signaled the peak of the AI capital expenditure boom.
The sell-off in Tokyo predominantly centered on stocks like Disco, Advantest, and Furukawa Electric, which had previously surged in anticipation of increased demand for high-end chips and data centers linked to AI industries. Notably, shares of Disco and Furukawa fell by 5% and 7%, respectively, while Advantest plummeted over 10% within the first 20 minutes of trading.
The impact of this downturn also extended to companies such as Mitsubishi Heavy Industries, Hitachi, and Kawasaki Heavy Industries, which had recently seen rising stock prices based on projected boosts from increased investments in AI-related electricity infrastructure.
On the currency front, the U.S. dollar gained 0.3% against a basket of other currencies in morning trading, while the Japanese yen weakened to 155.30 per dollar.
In Hong Kong, the Hang Seng index opened up by 0.4%, led by gains in companies such as Tencent, Alibaba, and Baidu. However, the chipmaker SMIC saw its shares decline by more than 2% after the market opened. Meanwhile, South Korea and Taiwan remained closed for the lunar new year holiday, and trading in Hong Kong ended after the morning session.
photo credit: www.ft.com
