Japanese Tech Stocks Fall Amid Global Rout Sparked by AI Upstart
Japanese technology shares tumbled on Tuesday, extending a two-day global market sell-off triggered by the launch of a cost-effective Chinese artificial intelligence (AI) model.
Leading the decline was Nvidia, a bellwether for the AI sector. Its shares plunged 17% on Monday, erasing $593 billion in market value – the largest one-day loss in history for any company.
The catalyst for the tech rout was DeepSeek, an AI assistant launched by Chinese startup DeepSeek. The model reportedly uses less data and costs a fraction of existing services, garnering attention from OpenAI CEO Sam Altman.
The emergence of DeepSeek has raised concerns about the overvaluation and dominance of AI giants. In Japan, Advantest (supplier to Nvidia) lost 10%, Tokyo Electron (chip equipment maker) fell 5.3%, and SoftBank Group (tech investor) declined 6%.
In the US, Broadcom lost 17.4%, Microsoft (ChatGPT backer) slipped 2.1%, and Alphabet (Google parent) ended down 4.2%. The Philadelphia Semiconductor Index plunged 9.2%, its sharpest decline since March 2020.
The selloff highlights the crowded positioning of investors in AI stocks and their high valuations. "The excessive weighting of tech stocks in portfolios and their high concentration in market indices creates a significant and under-appreciated risk," said David Bahnsen of The Bahnsen Group.
The hype surrounding AI has fueled a massive influx of capital into tech stocks, pushing valuations to record levels. However, the emergence of DeepSeek suggests that competition in the global AI arena is intensifying.
Investors will now turn their attention to the upcoming earnings season for tech companies, hoping for reassurance amid the market volatility.