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Asian tech stocks fell on Monday after concerns about global investment in artificial intelligence and the influence of Chinese start-up DeepSeek.
Japanese chipmakers Disco Corp and Advantest, Nvidia’s partner, fell 2.9 percent and 8.1 percent, respectively, while top Chinese chip maker SMIC fell 2.5 percent. Overnight trading in the US showed AI leader Nvidia poised to open lower at Friday’s close.
Drops come as markets digest an unexpected breakthrough by the Chinese AI company DeepSeekwhich released its R1 model last week, casting doubt on Silicon Valley’s heavy capital spending on artificial intelligence and the sustainability of America’s technical lead in artificial intelligence.
“DeepSeek R1 is AI’s Sputnik moment,” venture capitalist Marc Andreessen wrote on the social network X, likening the release to a wake-up call from the Soviet Union’s success in putting the first satellite into orbit.
DeepSeek topped the US App Store download charts on Monday. The small start-up claimed to build competitive models on a shoestring budget, prompting industry experts to question whether it was necessary pour in tens of billions of dollars into building clusters of AI chips for training large language models.
“It seems like there’s little reality that China hasn’t been sitting idly by, even though these tariffs and investment restrictions have been put in place for tech companies,” said Mitul Kotecha, head of EM macro and FX at Barclays.
“The fact that they are able to achieve cutting edge technology has surprised a lot of people. . . that seems to be what’s driving the change in mood today.”
Hong Kong’s Hang Seng index rose 1.1 percent by midday Monday, led by gains from Chinese technology companies listed in the territory, including Tencent and Alibaba. Chinese AI company iFlytek rose 2.4 percent.
Traders in Tokyo said Monday’s selling was narrowly focused on stocks such as Tokyo Electron and Fujikura, which have risen in recent months due to their heavy exposure to artificial intelligence investments.
“It’s DeepSeek for sure,” one Tokyo-based fund manager said of the sharp drop in Japanese tech stocks, adding that the market was adjusting to the idea that hardware spending on artificial intelligence – a theme that has benefited certain Japanese companies – could be much lower than current estimates.
Furukawa Electric, which makes wire cables for data centers, has posted particularly sharp gains since November, but its shares fell more than 9 percent on Monday, making it the biggest percentage loser in the Nikkei 225 Average.
A trader at one of Japan’s biggest brokerages said it was hard to say how long the pain would last and whether it was the start of a bigger sell-off.
Tokyo markets were expected to follow those in the U.S. when the latter opened later in the day, the person said, but added that some clients used the DeepSeek news as an excuse to lock in profits in stocks that have performed well since the beginning of the year .
Others noted that the selloff in major Japanese tech stocks had sparked a broader rout in Japanese stocks. The Topix rose on Monday morning as the market reacted to last week’s 0.25 percent gain rise in interest rates by the Bank of Japan.
Shares of Japan’s three biggest banks — MUFG, SMFG and Mizuho — rose about 2 percent on expectations that interest rate hikes would produce higher domestic profits.
