1 day ago
13 ARTICLE AD
Japanese technology firms sank on Tuesday, following a sharp sell-off on Wall Street after China’s DeepSeek chatbot disrupted the artificial intelligence sector, raising questions about massive investments by US tech giants.
The dollar rallied amid reports that Washington was considering universal tariffs on a range of goods, sparking renewed fears of a trade war.
In Tokyo, companies linked to artificial intelligence fell for a second consecutive day, mirroring a Wall Street rout in which Nvidia’s shares plunged 17%, erasing more than half a trillion dollars from its market capitalisation.
The sell-off was triggered by DeepSeek’s launch of its R1 chatbot, which reportedly rivals US AI leaders’ capabilities at a fraction of their investment costs.
Nvidia, a dominant player in AI, has seen its stock soar by approximately 1,900% over the past five years due to heavy investments in the sector.
However, DeepSeek’s announcement has raised concerns about the sustainability of such business models.
The news also followed former President Donald Trump’s announcement of a $500 billion initiative to bolster AI infrastructure in the United States.
Trump described the development as a “wake-up call” for US tech firms.
“Instead of spending billions and billions, you’ll spend less and, hopefully, achieve the same results,” he said. However, OpenAI CEO Sam Altman called DeepSeek’s chatbot “impressive.”
The Nasdaq dropped more than 3%, with the S&P 500 shedding over 1%. Broadcom, another US chipmaker, fell 17.4%.
The sell-off extended into Tokyo on Tuesday, with the Nikkei down 1.4%. AI-related stocks were particularly hard hit, with Advantest tumbling over 11%, Tokyo Electron dropping 5.7%, and Disco Corporation down nearly 3%. SoftBank, a key investor in Trump’s AI initiative, fell more than 5% after an 8% decline the previous day.
Greenback Rally
“The DeepSeek news has triggered a rethink of the AI revolution and one of the pillars of current US exceptionalism,” said Rodrigo Catril of National Australia Bank.
“If R1 lives up to its initial promise, the demand for sophisticated chips, data centre infrastructure, and energy may not be as substantial as initially projected.”
Asian markets were mixed during limited trading ahead of the Lunar New Year holiday. While Hong Kong, Singapore, and Mumbai posted gains, Sydney, Wellington, Manila, and Bangkok declined slightly. Shanghai, Jakarta, Seoul, and Taipei were closed.
The dollar gained strength following a report in the Financial Times that US Treasury Secretary Scott Bessent was considering universal tariffs starting at 2.5% and increasing incrementally each month, potentially reaching 20%.
The report followed a diplomatic spat between Trump and Colombia over deportation policies, during which Trump threatened a 25% tariff. Although Bogota relented, analysts noted the incident underscored Trump’s readiness to weaponise tariffs.
The dollar advanced against the yen, euro, and sterling, while the Mexican peso and South African rand both dropped more than 1%.
Investors are now looking ahead to the Federal Reserve’s policy meeting, hoping for clarity on its interest rate outlook in light of Trump’s tariff policies and broader economic plans.
“Data points to improving inflation and continued growth, but Trump’s executive orders on immigration could tighten the labour market and push up wages,” said Neil Wilson, an analyst at TipRanks.
“On tariffs, this is just the beginning. Trump may say he’d ‘rather not’ impose new tariffs on China, but the trajectory suggests otherwise,” Wilson added. “The market hasn’t fully priced in the reality of tariffs yet.”
– Key figures around –
Tokyo – Nikkei 225: DOWN 1.4 percent at 39,016.87 (close)
Hong Kong – Hang Seng Index: UP 0.1 percent at 20,225.11 (close)
Shanghai – Composite: Closed for a holiday
Euro/dollar: DOWN at $1.0437 from $1.0492 on Monday
Pound/dollar: DOWN at $1.2440 from $1.2496
Dollar/yen: UP at 155.71 yen from 154.61 yen
Euro/pound: DOWN at 83.85 pence from 83.94 pence
West Texas Intermediate: UP 0.5 percent at $73.52 per barrel
Brent North Sea Crude: UP 0.5 percent at $77.48 per barrel
New York – Dow: UP 0.7 percent at 44,713.58 (close)
London – FTSE 100: FLAT at 8,503.71 (close)
AFP
