AI fears weigh on tech stocks, as tariff talk boosts dollar

AFP | London

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Japanese tech firms sank yesterday following a rout on Wall Street after China's DeepSeek chatbot upended the artificial intelligence sector and sparked questions about huge investments by US titans.

The dollar rallied on a report saying Washington was considering universal tariffs on a range of goods, fanning fresh fears about a trade war.

Other Asian equity indices ended mixed in limited trade ahead of the Lunar New Year break.

European stock markets rose in morning deals and oil prices advanced, as traders awaited interest-rate decisions from the US Federal Reserve and European Central Bank due this week.

Tokyo-listed companies linked to the artificial intelligence sector tanked for a second straight day as investors tracked a rout on Wall Street that saw Nvidia crumble 17%, wiping more than half-a-trillion dollars off its market capitalisation.

The retreat came after DeepSeek unveiled its R1 chatbot, which has apparently shown the ability to match the capacity of US AI pace-setters for a fraction of the investments made by American companies.

"The DeepSeek news has triggered a rethink on the AI revolution and arguably one of the pillars of the current US exceptionalism," said Rodrigo Catril, foreign exchange strategist at National Australia Bank.

"If R1 is as good as first impressions seem to suggest, then demand for sophisticated chips, infrastructure (think data centres) and energy may not be as large as originally thought."

Nvidia has been the standout company that has led the drive by investors to seek out all things AI, spending vast sums of cash but seeing their share prices rocket.

The US chip firm has piled on about 1,900% in five years.

The DeepSeek bombshell also came on the heels of President Donald Trump's announcement of a new $500 billion venture to build infrastructure for artificial intelligence in the United States. Trump said the release of DeepSeek's model "should be a wake-up call for our industries that we need to be laser-focused on competing to win".

He argued that it could be a "positive" for US tech giants.

"Instead of spending billions and billions, you'll spend less, and you'll come up with hopefully the same solution," he said.

Sam Altman, the boss of OpenAI, which runs lead US chatbot ChatGPT, called DeepSeek "impressive". Wall Street's Nasdaq index filled with tech stocks tanked more than 3% and the S&P 500 more than 1% Monday, with another US chip-maker, Broadcom, off 17.4%.

The selling in Tokyo extended into Tuesday, with the Nikkei ending down 1.4%.

In the semiconductor sector, Advantest plunged more than 11, while Tokyo Electron shed 5.7% and Disco Corporation almost three.

Tech investor SoftBank, which is a key investor in Trump's AI project, tumbled more than five, having lost more than 8% the day before.