TAIPEI (Taiwan News) — Taiwan's stock market is preparing for potential turbulence following a steep drop in US AI stocks on Monday, sparked by the rise of the Chinese AI startup DeepSeek (深度求索).
DeepSeek, an AI startup based in Hangzhou, China, is primarily owned by Liang Wenfeng (梁文鋒), who also co-founded the quantitative hedge fund High-Flyer. The company's recently launched DeepSeek-v3 has taken the AI industry by surprise due to its development cost of just US$5.6 million (NT$184 million)—a stark contrast to the billions typically invested by major tech companies, per CTEE and CNN.
Cai Xin Media Chair Hsieh Chin-ho (謝金河) estimates that the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) could drop by 1,500 points if the market had been open on Tuesday, Yahoo Stock reported. The market remains closed for the Lunar New Year holiday.
AI-related stocks have been hit hard in the wake of DeepSeek’s announcement, with Nvidia’s stock falling more than 16% and TSMC American Depository Receipts (ADRs) dropping over 13% Monday. The tech-heavy Nasdaq plunged 3.1%, while the broader S&P 500 declined by 1.5%.
In contrast, the Dow Jones Industrial Average rose by 289 points, or about 0.7%, buoyed by gains in healthcare and consumer companies, sectors that could be less affected by the ongoing AI disruption.
Alexandr Wang, founder of the Chinese AI startup Scale AI, told CNBC that DeepSeek has acquired a surprising number of Nvidia’s H100 chips, reportedly around 50,000 units. These powerful graphics processing unit chips are the preferred processors for leading AI firms in the US, such as OpenAI.
However, the sale of such advanced AI chips to China has been restricted in 2022 by the Biden administration. DeepSeek's ability to secure these chips has sparked speculation about the startup's connections.
The timing of DeepSeek’s announcement has added to market uncertainty. The startup revealed its new model just one week after US President Donald Trump’s inauguration and the announcement of his US$500 billion “Stargate” initiative to accelerate AI development.
The initiative has garnered attention and significant investment from tech giants, including OpenAI, SoftBank, and Oracle. DeepSeek’s entry into the market is seen as a direct challenge to these efforts.
The rise of DeepSeek has intensified the US-China tech rivalry, with significant implications for the global AI industry, Hsieh said. Investors and analysts are closely monitoring how the US government and major tech companies will respond to this emerging challenge.
The breakthrough achieved by DeepSeek has raised concerns about Nvidia’s future valuation. Hsieh questioned how Nvidia’s worth should be reassessed in light of DeepSeek’s ability to develop an advanced AI model at a fraction of the cost that tech giants typically invest.
DeepSeek’s emergence is seen as a new factor in the AI industry that could significantly affect global capital markets.
*This information is not intended as personalized financial advice. Investors are encouraged to conduct their own research and analysis before making any investment decisions.*
