In Singapore on January 27, Nasdaq futures plummeted, and technology shares in Japan saw a decline as the growing popularity of a low-cost Chinese AI model shook investors' confidence in AI profitability and the sector's high demand for high-tech chips.
Nasdaq 100 futures were down by 2.6%, while S&P 500 futures slipped 1.4% in early European trading. In Tokyo, shares of Nvidia supplier Advantest fell by 8.5%.
Frankfurt-listed Nvidia shares dropped about 7%, with Tesla, Amazon, and Meta falling over 2% in early European trading.
Startup DeepSeek has introduced a free assistant utilizing cost-effective chips and minimal data, challenging the belief that AI would boost demand across the chip to data center supply chain.
According to Wong Kok Hoong, head of equity sales trading at Maybank, the situation points to a "crowded trade," with investors and traders now finding a reason to unwind positions. SoftBank Group, a startup-focused investor, slumped over 8%, marking its largest one-day decline since September. It was revealed last week that they would fund a data center joint venture with OpenAI.
Tokyo Electron, a major chip-making equipment company, experienced a 5% decrease.
Tech-heavy markets in Taiwan and South Korea were closed.
European tech stocks, particularly Dutch chip equipment maker ASML, are expected to face pressure at the market open. Nvidia's shares, the face of AI, have surged 196% since the beginning of 2024, outstripping Nasdaq's 35% gain.
The small Hangzhou-based startup behind DeepSeek, with its top-rated free app on Apple's App Store, remains largely mysterious. Researchers reported that the DeepSeek-V3 model, launched on January 10, trained using Nvidia's H800 chips for under $6 million.
Notably, the H800 chips, developed as a lower-capacity workaround for sales restrictions to China and later banned by U.S. sanctions, play a key role in this development. In addition to chip concerns, data centers and related firms suffered losses on Monday. Malaysia's YTL Power slid 7% in Kuala Lumpur to a two-month low.
Nick Ferres, Chief Investment Officer at Vantage Point Asset Management in Singapore, noted that the market is questioning the major tech companies' capital expenditure decisions, highlighting the crowded nature of current positioning.
Masahiro Ichikawa, Chief Market Strategist at Sumitomo Mitsui DS Asset Management, expressed concerns about the evolving perception of cutting-edge technologies globally. He emphasized that assuming American technologies like Nvidia and ChatGPT are superior may be premature.
Market reactions in China were varied, with the CSI300 AI shares index down 2.2%, while big data stocks rose by 4%.
(Note: The story has been edited to correct a typographical error in paragraph 10)