Chinese AI startup DeepSeek's rapid progress and cost-effective development of a powerful reasoning model have sparked concerns about its potential impact on U.S. tech giants and fueled volatility in the stock market. Japan's chip-related stocks declined sharply as investors reacted to DeepSeek's achievements and the implications for the global AI landscape.
Japan 's chip-related stocks experienced a significant decline on Monday, driven by concerns raised by Chinese AI startup DeepSeek regarding a potential challenge to America's dominant position in artificial intelligence. Andrew Jackson, head of equity strategy at ORTUS Advisors, highlighted this trend, stating, ' Japan 's chip stocks are selling off sharply on the DeepSeek concerns and we are seeing a rotation out of growth names into value.
'DeepSeek's rapid progress and focused approach in the field of artificial intelligence have sparked anxieties about the potential impact on Japan's own ambitions in the sector. Jesper Koll, a veteran investor, expressed these concerns, stating, 'We know Japanese chipmakers are potentially world class, but we also know that their ability to produce at-scale is limited; and it is right to worry that their speed of execution may run behind China's newfound will to win.'The startup's achievements, particularly the development of a reasoning model (r1) that outperformed OpenAI's latest o1 model in several third-party tests, at a remarkably low cost of under $6 million, have raised questions about the substantial investments made by major tech companies in AI models and data centers. While it remains uncertain whether DeepSeek will emerge as a sustainable and cost-effective alternative in the long run, initial apprehensions center around the potential threat to the pricing power of U.S. tech giants and the necessity to re-evaluate their massive AI expenditures. Junrong Yeap, IG's market strategist, commented on this sentiment, stating, 'While it remains to be seen if DeepSeek will prove to be a viable, cheaper alternative in the long term, initial worries are centered on whether U.S. tech giants' pricing power are being threatened and if their massive AI spending need re-evaluation.
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