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Asian tech stocks fell on Monday on concerns over global investment in artificial intelligence and the impact of Chinese startup DeepSeek.
Japanese chip companies Disco Corp and Nvidia partner Advantest fell 2.6 percent and 8.8 percent, respectively, while top Chinese chip maker SMIC fell 2.9 percent. Overnight trading in the US indicated that Nvidia-linked AI is poised to open its close on Friday.
The declines come when the markets are digesting unexpected advances of DeepSeekwhich last week released its R1 — a rival to OpenAI's ChatGPT — questions Silicon Valley's high spending on AI and the sustainability of America's technical superiority in artificial intelligence.
“DeepSeek R1 is AI's Sputnik moment,” venture capitalist Marc Andreessen wrote on social network X, comparing the release to a wake-up call from the Soviet Union's success in putting the first satellite into orbit.
DeepSeek topped the US App Store download charts on Monday. The small start-up claimed to build competitive models on a shoestring budget, leading industry insiders to question whether it was necessary pour in tens of billions of dollars into building clusters of AI chips for training large language models.
“There seems to be a bit of dawning on the fact that China has not been sitting idly by even with these tariffs and investment restrictions on tech companies,” said Mitul Kotecha, head of EM macro and FX at Barclays.
“The fact that they are able to achieve cutting edge technology has taken many people by surprise. . . That seems to be driving the shift in sentiment today.”
Hong Kong's Hang Seng index rose 0.9 percent in early afternoon trading on Monday, led higher by Chinese technology companies listed in the territory, including Tencent and Alibaba. China's AI company iFlytek rose 1.75 percent.
Traders in Tokyo said Monday's sell-off was narrowly focused on stocks such as Tokyo Electron and Fujikura, which have surged in recent months due to their high exposure to AI investments.
“It's definitely DeepSeek,” one Tokyo-based fund manager said of the sudden drop in Japanese tech stocks, adding that the market was adjusting to the idea that hardware spending on AI — a theme that has benefited some Japanese companies — could be much lower than current estimates.
Furukawa Electric, which makes wire cables for data centers, has posted particularly sharp gains since November, but its shares fell more than 11.3 percent on Monday, making it the biggest percentage loser in the benchmark Nikkei 225 Average.
A dealer at one of Japan's biggest brokerages said it was hard to say how long the pain would last and whether it was the start of a bigger sell-off.
Tokyo markets were expected to follow the US when markets opened later in the day, but they added that some clients were using the DeepSeek news as an excuse to lock in gains in stocks that have performed well since the start of the year.
Others noted that a selloff in major Japanese technology stocks triggered a broader decline in Japanese stocks. The Topix rose on Monday as the market reacted to last week's 0.25 percent gain interest rate increase from the Bank of Japan.
Shares of Japan's three biggest banks — MUFG, SMFG and Mizuho — all climbed about 1 percent on expectations that rising interest rates will lead to higher domestic profits.