World Stock Watch

Asian Tech Stocks Take a Hit as Chinese AI Startup Raises Concerns

The rapid progress of Chinese AI startup DeepSeek has sent shockwaves through the Asian tech industry, causing a significant decline in Japanese chip-related stocks. Shares of companies like Advantest, Tokyo Electron, and Renesas Electronics plummeted, with some experiencing losses of up to 8%.

A Challenge to US Leadership in AI

DeepSeek’s recent launch of a free, open-source large-language model has raised concerns about the potential threat to America’s global leadership in artificial intelligence. The startup’s ability to develop the model in just two months at a cost of under $6 million has sparked worries about the large amounts of money big tech companies have been investing in AI models and data centers.

Impact on Japanese Chipmakers

The speed and focus of China’s progress on chips is putting Japan’s own ambitions into question. Veteran investor Jesper Koll notes that while Japanese chipmakers are potentially world-class, their ability to produce at scale is limited, and their speed of execution may be outpaced by China’s newfound determination to succeed.

Data Center-Related Shares Also Affected

Data center-related shares, which were previously boosted by higher technology infrastructure spending, are also expected to be hit. Shares of wire and cable firms Furukawa and Fujikura fell significantly, with losses of up to 10%.

Global Market Implications

The fall in Japanese chip shares comes as Nasdaq futures dropped 1.62% during Asia trading hours, sparking concerns about a potential rough ride in the US market. The development has also led to worries about the pricing power of US tech giants and the need for re-evaluation of their massive AI spending.

A New Era of AI Competition

DeepSeek’s emergence has opened up new possibilities for AI development, with the potential to create new products and experiences that could win over the global populace. However, it also raises questions about the future of AI leadership and the potential for volatility in the stock market.