Shares of Japanese semiconductor-related companies extended their losses on Tuesday after Monday’s selloff, driven by the release of the Chinese AI model DeepSeek.
The selloff in US tech stocks added to the downward pressure, with investors reacting to fears of a disruption in the AI landscape.
DeepSeek fears: stocks tumble from US to Japan
Advantest Corp., a supplier to Nvidia, saw its shares drop as much as 11%, bringing its two-day decline to 18%, the steepest fall since the August market rout.
Similarly, Disco Corp. were down %, and SoftBank Group Corp. retreated close to 6%, erasing its gains from last week when it rallied on news of a $500 billion US AI infrastructure investment plan.
Other chip-related firms like Lasertec Corp., Screen Holdings Co., and Tokyo Electron Ltd. also fell.
In the US, Nvidia lost nearly 17%, wiping out almost $600 billion in market capitalisation — the largest single-day drop ever recorded by a US company.
Shares of the chipmaker closed at $118.58, marking its steepest decline since March 16, 2020, during the early days of the Covid-19 pandemic.
Other major players like Broadcom and AMD dropped 17.4% and 6.4%, respectively, while Microsoft shed 2.1% and Palantir fell 4.4%.
The broader US markets also reflected the tech selloff. The Nasdaq Composite dropped 3.07% to 19,341.83, while the S&P 500 slid 1.46% to 6,012.28.
However, the Dow Jones Industrial Average managed a gain of 0.65%, or 289.33 points, closing at 44,713.58, supported by advances in Apple, Johnson & Johnson, and Travelers.
AI-related derivative plays also suffered. Companies supplying power for AI infrastructure, like Constellation Energy and Vistra Corp., saw sharp declines of nearly 21% and 28%, respectively.
The DeepSeek challenge
The selloff followed the debut of DeepSeek’s R1 model, an open-source reasoning AI that reportedly outperformed OpenAI in several tests.
The model, developed for under $6 million, has raised questions about whether smaller, cost-efficient AI models can disrupt the dominance of large-scale, capital-intensive projects from Silicon Valley.
The Chinese AI model DeepSeek also surpassed OpenAI’s ChatGPT in downloads on Apple’s App Store in the US, according to The Spectator Index.
However, analysts at UBS argued that the sell-off might not be completely warranted.
UBS highlighted that the recent sell-off fueled by concerns around DeepSeek reflects heightened investor anxiety. UBS recommends that investors wait for upcoming US tech company results for more guidance instead of reacting prematurely.
The report emphasised that it’s too early to draw conclusions, as further details about DeepSeek and its potential market impact are expected to surface in the coming weeks.
UBS drew a parallel to the adoption of cheaper Chinese smartphones, which broadened global smartphone usage while allowing Apple to maintain dominance in the premium segment, holding an 80% profit share of the industry for nearly a decade.
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