Japanese technology stocks dropped on Tuesday following a global market sell-off triggered by the emergence of a low-cost Chinese AI model, DeepSeek. The model, which uses less data and is cheaper than existing AI services, attracted significant attention, including from OpenAI CEO Sam Altman, who called it “impressive.” This spurred concerns over the high valuations of leading AI companies, including Nvidia, which saw its stock drop 17% and lost $593 billion in market value in a single day.
The launch of DeepSeek’s AI model, developed using more affordable hardware, raised doubts about the dominance of U.S. tech giants like Nvidia. The market reacted negatively, with tech stocks worldwide, including companies like Advantest, Tokyo Electron, Broadcom, and Microsoft, also seeing sharp declines. The sell-off highlighted the crowded positioning of investors and the risks tied to the inflated valuations of these firms.
As competition in the AI space intensifies, DeepSeek’s cost-efficient approach is challenging the heavy investments U.S. companies have made in AI infrastructure. Investors are now focused on upcoming tech earnings, with many hoping to see reassurances from company executives amid growing uncertainties.