Japan chip stocks fall as DeepSeek’s challenge to U.S. AI dominance raises worries for Asian tech firms

Japan’s chip shares fell on Monday as DeepSeek, a Chinese AI startup raising concerns about a potential challenge to America’s global leadership in artificial intelligence that threatens Asian tech companies part of the US-dependent AI value chain.

Semiconductor test equipment supplier actions advancethat counts Nvidia among its customers, it fell 7.99%. Tokyo Electron fell 3.94%, while Renesas Electronics fell 0.4%.

Softbank Groupwhich owns chip designer Arm, slid 5.4% later trading higher last week on the CEO Masayoshi Son plans to invest $100 billion in the United States

“Japan chip stocks are selling off sharply on DeepSeek concerns and we’re seeing a rotation of growth names in value,” Andrew Jackson, head of equity strategy at ORTUS Advisors told CNBC via email.

Data center-related stocks that have been boosted by higher tech infrastructure spending will also be hit, he added.

Stocks of wire and cable companies Furukawa and Fujikura also fell 9.8% and 8.16%, respectively.

DeepSeek launched a free, open-source broad-language model in late December, saying it was developed in only two months at a cost of less than $6 million. Last week, the lab launched r1, a reasoning model that outperformed OpenAI’s newer o1 in several third-party tests.

The new developments have raised concerns about the large sums of money that big tech companies have invested in AI models and data centers. DeepSeek also had to contend with the strict restrictions on semiconductors the US government placed on China, limiting access to advanced chips.

“While it remains to be seen whether DeepSeek will be a viable and cheaper alternative in the long term, initial concerns center on whether the US tech giants’ pricing power is under threat and whether their massive AI spending will require a revaluation”. IG market strategist Junrong Yeap said in a note.

DeepSeek has become the most downloaded free app Apple’s iPhone.

The drop in Japanese chip stocks comes as Nasdaq futures fell 1.62% during after-hours trading in Asia.

“Judging by the move in Nasdaq futures, we could be in for a tough ride tonight in the U.S. as well,” Jackson added.

“With such a cheap model, many new products and experiences can now emerge trying to win the hearts and minds of the global population,” said Chamath Palihapitiya, Canadian-American venture capitalist and CEO of Capital Social. said on the X social platformwhich sees volatility in the stock market as the capital markets seek to recover the values ​​of the “Magnificent 7” companies.

“Nvidia is the most at risk for obvious reasons,” he said.