Japanese chip-related stocks saw significant losses for a second consecutive day, driven by the disruptive advancements of Chinese AI startup DeepSeek. Semiconductor equipment supplier Advantest plunged over 10%, while Tokyo Electron and Renesas Electronics fell 3.6% and 2.29%, respectively.
Softbank Group, the owner of chip designer Arm, also dropped 5.26%. Data center-related firms Furukawa and Fujikura experienced losses exceeding 8%, reflecting broader market concerns.
DeepSeek recently unveiled a large language model created in just two months with a budget under $6 million. The company’s reasoning model, R1, has outperformed OpenAI’s o1 in several independent tests, showcasing its advanced capabilities.
Analysts suggest these developments question U.S. dominance in AI and semiconductor technology. Andrew Jackson of ORTUS Advisors noted that the U.S. may need to reevaluate its chip restrictions on China.
DeepSeek’s focus on reasoning abilities, particularly through its “chain of thought” method to enhance response accuracy, highlights the growing competitiveness of Chinese AI research. Citi analysts emphasized that DeepSeek’s progress challenges the narrative of U.S. tech exceptionalism and raises doubts about the sustained dominance of major U.S. tech firms.
Global semiconductor stocks have also felt the impact. Nvidia experienced its largest single-day market cap loss, dropping $600 billion after its stock price fell 17%. Other international chip giants, including ASML and ASM International, saw declines during European trading hours. Micron and Arm Holdings fell by over 11% and 10%, respectively.
Despite the sell-off, some experts argue the market reaction may be exaggerated.
Richard Kaye of Comgest highlighted that semiconductor demand remains robust, driven by both DeepSeek’s AI infrastructure and the broader AI sector’s growth. He described the sharp drop in semiconductor stocks, including Tokyo Electron and ASML, as a misstep, given the sector’s high relevance in advancing AI technologies.
