Chinese AI Startup DeepSeek Shakes Global Tech Markets, Sparking Concerns Over US AI Dominance

Asia shares are mixed after a US tech selloff as a Chinese rival joins the global AI frenzy

TOKYO (AP) -- Asian shares were mixed in thin Lunar New Year trading on Tuesday after Wall Street's tech superstars tumbled as a competitor from China raised doubts over the recent artificial-intelligence market frenzy. Japan's benchmark Nikkei 225 lost 0.9% to 39,214.19. Australia's S&P/ASX 200 was little changed, inching up less than 0.1% to 8,411.70. Hong Kong's Hang Seng rose 0.2% to 20,236.13. Markets in South Korea, Shanghai markets and other parts of the region were closed for holidays. Among technology companies in Japan, SoftBank Group Corp. stock extended its losses, plunging 10%. Hitachi Ltd. lost 4%, but Fujitsu and Sony Corp. recovered. Computer chip maker Tokyo Electron sank 7.6%. Fuji Media Holdings, rocked by a sex scandal, rose nearly 9% in morning trading after a marathon news conference overnight by its top executives that lasted more than 10 hours. Fuji's stock price has zigzagged in recent months amid Japanese magazine reports about "a problem" involving an anchorwoman and a Japanese male star. He has subsequently announced his retirement. On Monday, the S&P 500 dropped 1.5% to 6,012.28, dragged down in large part by a 16.9% fall for Nvidia. Other Big Tech stocks also took heavy losses, pulling the Nasdaq composite down 3.1% to 19,341.83 for its worst loss in more than a month. The damage was focused on AI-related stocks, while the rest of the market held up much better. The Dow Jones Industrial Average rose 0.7% to 44,713.58, and the majority of U.S. stocks climbed. But anyone holding an S&P 500 index fund, which are found in many 401(k) accounts, felt the pain because of how influential those tech giants have become on indexes. The shock to financial markets came from China, where an AI company called DeepSeek unveiled a large language model that can compete with U.S. giants but at potentially a fraction of the cost. DeepSeek had already hit the top of the chart for free apps on Apple's App Store by Monday morning, and analysts said such a feat was particularly impressive given how the U.S. government has restricted Chinese access to top AI chips. It's unclear, however, how much DeepSeek's announcement will ultimately shake the economy that's built around the AI industry, from the chip makers making semiconductors to the utilities hoping to electrify vast data centers gobbling up computing power. "It remains to be seen if DeepSeek found a way to work around these chip restrictions rules and what chips they ultimately used as there will be many skeptics around this issue given the information is coming from China," according to Dan Ives, an analyst with Wedbush Securities. DeepSeek's disruption nevertheless rocked AI-related stocks worldwide. It's a sharp turnaround for the AI winners, which had soared in recent years on hopes that all the investment pouring in would remake the global economy and deliver gargantuan profits along the way. Such stellar performances also raised criticism that their stock prices had gone too far, too fast. Before Monday's drop, which was its worst since the 2020 COVID crash, Nvidia's stock had soared from less than $20 to more than $140 in less than two years, for example. A small group of seven such companies has become so dominant that they alone accounted for more than half the S&P 500's total return last year, according to S&P Dow Jones Indices. They include Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. Their immense sizes give them huge sway over the S&P 500 and other indexes that give more weight to bigger companies. Markets are also awaiting earnings reports later this week from Apple, Meta Platforms, Microsoft and Tesla. In energy trading, benchmark U.S. crude lost 5 cents to $73.12 a barrel. Brent crude, the international standard, shed 1 cent to $76.17 a barrel. In currency trading, the U.S. dollar rose to 155.54 Japanese yen from 154.51 yen. The euro cost $1.0434, down from $1.0493.

Asia tech stocks slide in wake of Wall Street rout

Japanese markets extended their slide on Tuesday as the heavy sell-off in technology stocks headed into a second day, driven in part by the overnight plunge in Nvidia shares. In recent days, Chinese artificial intelligence start-up DeepSeek has stunned Silicon Valley with advances apparently achieved with far less computing power than its American rivals. President Donald Trump has called DeepSeek a 'wake-up call' for US industries. Nvidia lost some $589bn of market value on Monday in a historic plunge following panic in Wall Street and Silicon Valley over DeepSeek's threat to the continued dominance of the US in AI and the need to invest hundreds of billions of dollars in the underlying infrastructure. The tech-heavy Nikkei 225 fell about 1.5 per cent in early trading, while the broader Topix, which is more domestic and has lower weightings for Japan's tech exporters, traded flat. Shares in SoftBank Group were hard hit, plunging more than 5.2 per cent in early trading on Tuesday and extending their drop this week to around 13 per cent. Analysts said SoftBank was especially affected by the overnight 10 per cent plunge in shares of Arm Holdings -- the US-listed chip design company in which the Japanese group holds an 88 per cent stake Even after this week's crash, SoftBank shares are more than 43 per cent higher than they were in August, said Kirk Boodry, an analyst who covers the company at Astris Advisory in Tokyo, noting the stock's high volatility. "It looks horrible now, but it's probably normal for SoftBank," he said. "It's another of its round trips, where you get a big bump then it comes down to earth." Boodry continues to rate the company as 'buy'. Last week, the company's founder, Masayoshi Son, accompanied Trump for the unveiling of the Stargate joint venture that is to involve SoftBank, Oracle and OpenAI in a $100bn data centre investment that they said could stretch to $500bn over four years. DeepSeek and its promise of a much lower-cost AI model, said Jefferies strategist Chris Wood, has raised the question of whether Son's photo-op announcement "marked the peak of the AI capex boom". The selling in Tokyo was focused on Disco, Advantest and Furukawa Electric -- stocks that had soared in recent months on an expected expanding demand for high-end chips, data centres and other AI-related industries. Shares in Disco and Furukawa were down 5 and 7 per cent respectively on Tuesday morning. Advantest plunged over 10 per cent in the first 20 minutes of trading. The sell-off expanded to include companies such as Mitsubishi Heavy Industries, Hitachi and Kawasaki Heavy Industries that had until recently traded higher on the bet that they would benefit from higher overall investment in AI-linked electricity infrastructure. The US dollar recovered by 0.3 per cent against a basket of currencies in morning trading, while the yen weakened to ¥155.30 per greenback. Hong Kong's Hang Seng index opened up 0.4 per cent on Tuesday, led by Alibaba and Xiaomi, although chipmaker SMIC was down more than 2 per cent after the open. South Korea and Taiwan are closed for the lunar new year break, while Hong Kong ceases trading at the end of the morning session.