TSMC Shares Plummet Amid AI Sector Turmoil Following DeepSeek's Controversial AI Model Announcement

TSMC Shares Tumble as AI Sector Faces Uncertainty

Taiwan Semiconductor Manufacturing Co. (TSMC) experienced a significant market shock as trading resumed following the Lunar New Year holiday. The company's shares plummeted by 6.6% to 1,070 New Taiwan dollars ($32.32) on the Taiwan exchange, marking the steepest decline in nearly six months 1

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. This sharp downturn was part of a broader selloff in artificial intelligence (AI) stocks, triggered by recent developments surrounding Chinese AI firm DeepSeek.

DeepSeek's Controversial AI Model Announcement

The market turbulence stems from DeepSeek's announcement of its R1 AI model, which the company claims was developed for a mere $5.6 million. This assertion has been met with widespread skepticism from industry experts, including Wedbush analyst Dan Ives, who dismissed it as "likely a fictional story" 1

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. The controversy deepened as prominent tech figures raised concerns about DeepSeek's development process and potential violations of export controls.

Ripple Effects Across the Tech Sector

The uncertainty surrounding DeepSeek's claims has had far-reaching consequences in the semiconductor and AI sectors:

1. Nvidia Corp. saw a staggering $600 billion decline in market value last Monday 1

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2. TSMC's U.S.-listed shares initially fell 13% before recovering some losses 2

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3. Taiwan's benchmark Taiex index dropped 4.4% to 22,627 points 1

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4. Hon Hai Precision Industry Co. (Foxconn) tumbled 9.2% to 165.50 New Taiwan dollars 1

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Concerns Over National Security and Technology Transfer

The situation has attracted attention from high-level stakeholders:

1. OpenAI investor Josh Kushner suggested that the Chinese model may have been trained using U.S. technology, potentially violating export controls 1

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2. Scale AI CEO Alexandr Wang alleged that DeepSeek had acquired 50,000 advanced chips through unreported channels, a claim seemingly supported by Tesla CEO Elon Musk 1

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3. The White House has reportedly begun examining DeepSeek's operations for potential national security risks, particularly given the company's backing by High-Flyer, an $8 billion Chinese quantitative hedge fund 1

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As the AI industry grapples with these developments, the market remains volatile, with investors closely watching for further updates on DeepSeek's claims and their potential impact on the global AI and semiconductor landscape.