Japan's chip-related stocks experienced a sharp decline on Monday, influenced by growing concerns surrounding Chinese AI startup DeepSeek. This downturn follows a drop in Nasdaq futures by 1.62% during Asia trading hours, signaling potential volatility in the U.S. market. DeepSeek has drawn attention with its rapid development of a free, open-source large-language model, challenging the global leadership of American tech firms in artificial intelligence.
DeepSeek's model, created in just two months at a cost of under $6 million, has outperformed OpenAI's latest offering in several third-party tests. Additionally, DeepSeek launched a reasoning model, r1, which also surpassed OpenAI's o1 in certain evaluations. This achievement has raised alarms across the tech industry, leading to significant shifts in stock values for Japanese semiconductor companies.
Shares of Advantest, a key supplier to Nvidia, plummeted by 7.99%, highlighting Nvidia's vulnerability due to its deep ties to the AI sector. Other major Japanese tech firms also faced declines; Tokyo Electron's shares dropped 3.94% and Renesas Electronics saw a 0.4% decrease. Softbank Group, the owner of chip designer Arm, fell by 5.4% after showing gains the previous week. Additionally, wire and cable manufacturers Furukawa and Fujikura reported substantial losses of 9.8% and 8.16%, respectively.
The U.S. government's stringent semiconductor restrictions on China have further complicated the landscape, creating challenges for tech companies seeking access to advanced chips. However, DeepSeek's success story highlights a shift in the AI arena that could disrupt current market dynamics.
"While it remains to be seen if DeepSeek will prove to be a viable, cheaper alternative in the long term, initial worries are centered on whether U.S. tech giants' pricing power are being threatened and if their massive AI spending need re-evaluation," – Junrong Yeap
DeepSeek's rapid ascent has raised questions about the substantial investments that major technology companies have poured into AI models and data centers.
"Judging from the move in Nasdaq futures we may be in for a rough ride tonight in the U.S. also," – Jackson
"Japan's chip stocks are selling off sharply on the DeepSeek concerns and we are seeing a rotation out of growth names into value," – Andrew Jackson
In addition to impacting financial markets, DeepSeek has become the most downloaded free app on Apple's iPhone, capturing consumer attention worldwide.
"With a model this cheap, many new products and experiences can now emerge trying to win the hearts and minds of the global populace," – Chamath Palihapitiya
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