Asian technology stocks fell sharply Monday as Chinese AI startup DeepSeek sparked sector-wide concerns about artificial intelligence investment sustainability and pricing pressures, triggering selloffs in chip-related shares while boosting some Chinese tech giants.
Semiconductor stocks lead market declines
Japanese chip equipment manufacturers bore the brunt of selling, with Disco Corp dropping 2.6% and Advantest plunging 8.8%. China’s top chipmaker SMIC declined 2.9%, mirroring pre-market weakness in Nvidia shares after U.S. trading signals. The selloff followed DeepSeek’s launch of its R1 model last week—a ChatGPT competitor that venture capitalist Marc Andreessen called “AI’s Sputnik moment” on X, referencing the Soviet satellite that triggered the space race.
Tokyo Electron and Fujikura saw concentrated selling after months of AI-driven gains, with Furukawa Electric plummeting 11.3%—the worst performer in Japan’s Nikkei 225. The cable manufacturer had surged since November due to data center demand before Monday’s reversal. A Tokyo-based fund manager linked the tech rout to recalculated AI hardware expectations: “The market was readjusting to the idea that hardware spending on AI could be a lot lower than current estimates.”
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Banking sector diverges from tech slump
Japan’s Topix index rose 0.2% as investors reacted to the Bank of Japan’s 0.25% rate hike last week. Shares of Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group all climbed about 1% on expectations of improved lending margins. This contrasted with the tech-heavy Nikkei’s performance, highlighting sector-specific impacts from the AI news.
DeepSeek’s pricing upends AI economics
Bernstein analysts revealed Sunday that DeepSeek’s models undercut OpenAI by 20-40 times on pricing. The Chinese firm charges $0.55 per million tokens for its Reasoner model compared to OpenAI’s $15 for equivalent usage of its o1 model. Tokens—the basic units AI uses to process text, equivalent to about three-quarters of a word—have become a key cost metric in generative AI operations.
Open-source vs proprietary model debate
DeepSeek’s open-source approach contrasts sharply with OpenAI’s closed system, with Bernstein noting the development “brings up very interesting questions about the viability of proprietary versus open-source efforts.” The pricing gap coincides with DeepSeek topping U.S. App Store downloads ahead of ChatGPT, despite being a relatively unknown Chinese startup until recently.
Barclays’ Mitul Kotecha highlighted market surprise at China’s tech advancements: “The fact they’re able to achieve high-end tech has caught a lot of people by surprise… this seems to be what’s driving the shift in sentiment today.” The comments follow U.S. efforts to restrict Chinese access to advanced semiconductor technology through export controls.
Mixed regional market reactions
Hong Kong’s Hang Seng Index gained 0.9% led by Tencent (+1.2%) and Alibaba (+0.8%), while Chinese AI specialist iFlytek rose 1.75%. The divergence reflects both DeepSeek’s domestic success and lingering questions about global AI infrastructure needs. U.S.-listed Chinese tech stocks showed early strength in pre-market trading despite the semiconductor sector’s woes.
Uncertainty over selloff duration
A dealer at a major Japanese brokerage noted conflicting market signals: “It’s hard to say how long the pain will last… some clients are using the DeepSeek news as an excuse to lock in profits on stocks that had performed well since January.” Traders await U.S. market opens for clearer direction, with Nvidia’s performance seen as a key bellwether.
DeepSeek claims its competitive models were developed on a “bootstrapped budget,” challenging assumptions that AI leadership requires massive capital expenditures. This assertion comes as global tech firms have committed billions to AI chip clusters and data centers, with Nvidia’s market value surpassing $3 trillion earlier this month.
The startup’s rapid ascent—from obscurity to topping app charts and rattling global markets within days—has intensified debates about AI development costs. Bernstein’s analysis suggests DeepSeek’s pricing could force industry-wide margin compression, particularly for companies relying on proprietary model revenue.
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