Japan’s chip-related stocks experienced a sharp decline on Monday, spurred by concerns over Chinese AI startup DeepSeek’s potential to challenge America’s leadership in artificial intelligence.
The company’s advancements, including its launch of a free, open-source AI model and a new reasoning model that outperformed OpenAI’s o1, have raised alarm bells for the global tech industry.
Shares of semiconductor testing equipment supplier Advantest fell 8.6%, while Tokyo Electron dropped 4.9%, and Renesas Electronics saw a 1.24% dip. Softbank Group, which owns chip designer Arm, plunged 8.3% after a previous surge in stock value.
These declines reflect broader market fears that DeepSeek’s rapid progress, despite facing U.S. semiconductor export restrictions, could disrupt the AI market and reduce the pricing power of U.S. tech giants.
The concerns are compounded by China’s growing capabilities in chip production, which could threaten Japan’s position in the global tech supply chain. Veteran investor Jesper Koll noted that while Japanese chipmakers are world-class, their ability to scale production at the pace of China’s progress is uncertain.
DeepSeek’s recent success in developing its AI models at a fraction of the cost of U.S. counterparts has prompted market analysts to question whether the massive investments by U.S. tech companies in AI infrastructure will need to be reevaluated.
With DeepSeek’s models now available as free apps, many fear the emergence of low-cost alternatives that could reshape the AI landscape.
As the Nasdaq futures dropped 1.62% during Asia trading hours, market experts warned of volatility in the U.S. stock market, with Nvidia being particularly vulnerable due to its significant stake in the AI market.