Asian technology stocks experienced a notable decline on Monday, spurred by growing concerns about global artificial intelligence (AI) investment and the emerging influence of Chinese start-up DeepSeek. According to the Financial Times, the release of DeepSeek’s R1 model last week has cast doubt on the necessity of huge investments in AI hardware, particularly in the West.
In Japan, chipmakers faced significant losses. Disco Corp dropped 2.9%, while Advantest, a partner of Nvidia, saw a larger decline of 8.1%. SMIC, China’s leading chipmaker, also fell 2.5%. Meanwhile, in US trading, AI giant Nvidia was expected to open lower, following a drop in overnight trading. This downturn follows the unexpected strides made by DeepSeek, which has raised concerns over the sustainability of US-led AI spending and the competitive edge of Silicon Valley.
DeepSeek’s sudden success has left industry experts questioning the need for billions of dollars in investments to build massive AI infrastructure. Marc Andreessen, a prominent venture capital investor, described DeepSeek’s R1 model release as “AI’s Sputnik moment” in a social media post, drawing a comparison to the Soviet Union’s surprise achievement of launching the first satellite into orbit. The Financial Times notes that the company’s budget-conscious approach has led some to wonder if expensive AI chip clusters for large language model training are truly necessary.
DeepSeek, a small start-up, reached the top of the App Store charts in the US on Monday, further igniting these concerns. The company’s progress has caught many off guard, especially given the economic constraints it faced. Mitul Kotecha, head of EM macro and FX at Barclays, told the Financial Times, “It seems as if there is a bit of reality dawning that China has not been sitting idle, even as these tariffs and investment restrictions on tech companies have been put in place.”
Meanwhile, in Hong Kong, the Hang Seng index rose by 1.1%, led by gains in Chinese tech stocks like Tencent and Alibaba. Chinese AI firm iFlytek also saw a 2.4% rise. In contrast, Japanese traders noted sharp declines in stocks tied to AI investments, such as Tokyo Electron and Fujikura. According to one Tokyo-based fund manager, the selling was directly linked to the growing doubts about the scale of hardware spending required for AI, a theme that had previously benefited certain Japanese companies.
The Financial Times reports that Furukawa Electric, a maker of wire cables for data centers, saw its stock plummet by more than 9%, making it the biggest loser on Japan’s Nikkei 225. Some traders in Tokyo suggested that the drop in Japanese tech stocks could signal a broader market adjustment. With traders using the DeepSeek news to lock in profits, there is speculation about the longevity of the downturn.
At the same time, Japan’s broader market showed positive movement, with the Topix rising following last week’s 0.25% interest rate hike by the Bank of Japan. Shares in Japan’s top three banks—MUFG, SMFG, and Mizuho—rose by around 2%, as investors anticipated stronger domestic profits driven by the rate increase.
