Asian Stocks Slide Amid DeepSeek AI Concerns

Asian stock markets remained subdued on Tuesday, with Japan leading the losses as concerns over a newly unveiled Chinese artificial intelligence (AI) model rattled local chipmaking stocks.

Markets in China and South Korea were closed for the Lunar New Year holiday, and trading activity across the region is expected to stay muted throughout the week due to additional regional holidays. However, Hong Kong stocks edged up slightly, benefiting from a short trading day.

Tech Sell-Off on Wall Street Casts a Shadow Over Asia

Asian markets mirrored the weak performance of Wall Street, where the NASDAQ Composite suffered a sharp 3% decline driven by a steep sell-off in technology stocks. NVIDIA, one of the largest players in the semiconductor space, lost nearly $600 billion in market value in a single session, marking its largest-ever drop.

Despite the recent downturn, signs of stabilisation emerged as U.S. stock index futures held steady during Asian trading hours, offering some hope of a rebound.

All Eyes on U.S. Tech Earnings and Federal Reserve Decision

Investors are now shifting their focus to major U.S. tech earnings scheduled for release later this week. Additionally, markets are anticipating the Federal Reserve’s decision on interest rates, with expectations that rates will remain unchanged following the conclusion of the Fed's meeting on Wednesday.

DeepSeek AI Sparks a Global Chipmaker Rout

DeepSeek’s newly launched R1 model sent shockwaves through global chipmaking stocks. The model demonstrated performance comparable to AI systems like ChatGPT but achieved this using older hardware and significantly lower production costs.

This innovation has raised questions about the future of investments in advanced AI chips and data centre infrastructure. Companies may now prioritise building cost-effective and efficient AI systems instead of relying on expensive high-end chips.

If this trend continues, it could severely impact the AI-driven demand that has buoyed semiconductor companies over the past two years, leading to a potential shift in the tech industry’s dynamics.