Asia tech stocks fall as DeepSeek sows doubts about AI spending

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Asian technology stocks fell on Monday following concerns over global artificial intelligence investment and the impact of Chinese start-up DeepSeek.

Japanese chip companies Disco Corp and Advantest, an Nvidia partner, were down 2.9 per cent and 8.1 per cent respectively, while China’s leading chipmaker SMIC declined 2.5 per cent. Overnight trading in the US indicated that AI bellwether Nvidia was poised to open down on its Friday close.

The declines come as markets digested the unexpected advances by DeepSeek, which last week released its R1 — a rival to OpenAI’s ChatGPT generative AI model — casting doubt on Silicon Valley’s hefty AI capex spending and the sustainability of the US technical edge in artificial intelligence. 

“DeepSeek R1 is AI’s Sputnik moment,” venture capital investor Marc Andreessen wrote on social media site X, comparing the release with the wake-up call of the Soviet Union’s success of putting the first satellite into orbit.

DeepSeek hit the top of the App Store download charts in the US on Monday. The small start-up has claimed to be building competitive models on a bootstrapped budget, causing industry insiders to question whether it was necessary to pour tens of billions of dollars into building AI chip clusters for large language model training. 

“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”, said Mitul Kotecha, head of EM macro and FX at Barclays. 

“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.”

Hong Kong’s Hang Seng index was up 1.1 per cent by midday on Monday, led higher by the Chinese tech companies listed in the territory including Tencent and Alibaba. China AI company iFlytek was up 2.4 per cent.

Traders in Tokyo said Monday’s selling had been tightly focused on stocks such as Tokyo Electron and Fujikura, which have surged in recent months due to their high exposure to AI investment. 

“It’s DeepSeek for sure,” said one Tokyo-based fund manager of the sudden drop in Japanese tech shares, adding that the market was readjusting to the idea that hardware spending on AI — a theme that had benefited certain Japanese companies — could be a lot lower than current estimates. 

Furukawa Electric, which makes wire cables for data centres, had seen particularly sharp gains since November, but its shares tumbled by more than 9 per cent on Monday, making it the biggest percentage loser in the benchmark Nikkei 225 Average. 

A dealer 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’s markets were expected follow those in US when the latter open later in the day, the person said, but they added that some clients were using the DeepSeek news as an excuse to lock in profits on stocks that had performed well since the start of the year.

Others noted that the sell-off in big Japanese tech stocks was triggering a broader rout in Japanese stocks. The Topix rose on Monday morning, as the market reacted to last week’s 0.25 per cent interest rate rise by the Bank of Japan. 

Shares in Japan’s three biggest banks — MUFG, SMFG and Mizuho — all climbed about 2 per cent on expectations that increasing interest rates will produce stronger domestic profits.