(Bloomberg) — On the heels of the Chinese AI model DeepSeek’s debut, Japanese semiconductor stocks like Advantest Corp. and Disco Corp. are feeling the pressure, continuing their decline from Monday. The release triggered a ripple effect, leading to a selloff in US tech stocks.
In the realm of top stories from Bloomberg, Advantest, a company known for providing testing equipment to Nvidia Corp., experienced a drop of up to 11%. This marks the most significant two-day fall since August, amounting to an 18% decrease. Meanwhile, Disco, another staple in chip equipment manufacturing, saw its shares tumble by 9.5%, and SoftBank Group Corp. slipped 6.7%. Notably, SoftBank’s recent gains, driven by news of a $19 billion AI infrastructure investment plan in the US, have been completely wiped out.
Other tech giants in Japan, such as Lasertec Corp., Screen Holdings Co., and Tokyo Electron Ltd., weren’t spared from the downturn either, each seeing a dip of over 4% at various points throughout the trading day. Across the Pacific, Nvidia faced a staggering loss, with its market capitalization shrinking by nearly $600 billion as investors worried about the emerging competition from DeepSeek, perceived as a cheaper alternative to US entities like OpenAI and Meta Platforms Inc.
Ryoutarou Sawada, an analyst from Tokai Tokyo Intelligence Laboratory, remarked, “With AI costs decreasing, AI-related stocks are negatively impacted, and it’s a trend that’s here to stay. This also means semiconductors, vital for generative AI, will become less expensive, which spells trouble for Japanese chip equipment manufacturers.”
DeepSeek’s impact is expected to cause reevaluation in AI infrastructure investments, potentially slowing down related expenditures, Pelham Smithers from Pelham Smithers Associates noted in a recent report. This has delivered a setback to power companies that were banking on AI developments to drive up electricity demands in data centers. Consequently, shares in companies like Kyushu Electric Power Co., Tokyo Electric Power Co., and Kansai Electric Power Co. fell by over 2% on Tuesday.
Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Asset Management, observed, “It’s only to be expected that the unsettling news would affect sectors adjacent to AI, such as those in power generation.”
Even Mitsubishi Heavy Industries Ltd., which had seen an uptick last week based on anticipated AI-induced demand for its US gas turbine business, took a hit, with its shares plummeting 8.6% at one point—the largest drop since August.
Cable manufacturers for data centers, such as Furukawa Electric Co. and Fujikura Ltd., weren’t immune to the downturn, each experiencing declines exceeding 8.5%. These companies, alongside Advantest, Mitsubishi Heavy, and SoftBank, topped the Nikkei 225’s list of worst performers, which saw an overall drop of 0.6% by 11:30 a.m. in Tokyo.
However, Pelham Smithers suggests a silver lining could exist for Japanese AI innovators if they harness DeepSeek’s “cost-saving” capabilities to craft a Japanese-language model, potentially benefiting from the disruptions caused by the Chinese entrant in the long run.
The analysis was further supported by contributions from Aya Wagatsuma and Toshiro Hasegawa. The article also incorporates analyst insights, chart updates, and details on affected power stocks.
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