After the launch of the AI model by the Chinese startup DeepSeek, shares of the Japanese chip manufacturer Nvidia fell by almost 18% on Monday, reducing the company's capitalization by $600 billion, marking a record one-day market loss.
As reported by Reuters, on Tuesday, shares of the microchip testing equipment manufacturer Advantest, a supplier to Nvidia, lost 10% after falling nearly 9% on Monday. The chip production equipment manufacturer Tokyo Electron and tech startup investor SoftBank Group fell by 5%.
In the US on Monday, Broadcom closed trading with a 17.4% drop, while shares of Microsoft fell by 2.1%, and the parent company Google Alphabet closed with a 4.2% decline.
The Chinese AI model uses less data and is several times cheaper than the currently existing services. The launch and growing popularity of DeepSeek prompted investors to dump tech company stocks worldwide, causing turmoil from Tokyo to Amsterdam and Silicon Valley.
Markets in South Korea and Taiwan are closed for the next few days due to the Lunar New Year celebrations. Mainland China is closed until February 4, so Japanese companies are in the spotlight.
The launch and popularity of the application contrast with the weak reception of the Chinese ChatGPT counterpart created by the search giant Baidu, highlighting the gap in AI capabilities between American and Chinese companies. Meanwhile, the creators of DeepSeek claim that only about six million dollars were spent on AI development, while Google, Microsoft, and other large companies spend billions on their similar projects. DeepSeek can operate on much less powerful microchips, and now investors are questioning whether the multibillion-dollar investments in creating powerful chips produced by Nvidia and similar companies are justified.
Japan's Minister of Digital Technology Masaaki Taira stated that the emergence of DeepSeek has overturned the conventional belief that Chinese AI lags behind by many years.