HONG KONG: Japanese tech firms sank Tuesday (Jan 28) after a sell-off in US titans following news of China's DeepSeek chatbot, while the US dollar rallied on a report saying Washington was considering universal tariffs on a range of goods.
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 per cent, wiping more than half-a-trillion dollars off its market capitalisation.
The retreat came after DeepSeek unveiled its R1 chatbot that has apparently shown the ability to match the capacity of US AI pace-setters for a fraction of the investments made by American companies.
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 per cent in five years.
The DeepSeek bombshell also came on the heels of President Donald Trump's announcement of a new US$500 billion venture to build infrastructure for artificial intelligence in the United States.
Trump said the release "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.
The Nasdaq tanked more than three per cent and the S&P 500 more than one per cent, with another US chip-maker, Broadcom, off 17.4 per cent.
Art Hogan, chief market strategist at B. Riley Wealth, described Monday's selling as "shoot first, ask questions later", noting that some are sceptical about DeepSeek's assertions.
Still, the selling in Tokyo extended into Tuesday. Advantest plunged more than nine per cent, while Tokyo Electron and Disco Corporation shed more than three per cent.
Tech investor SoftBank, which is a key investor in Trump's AI project, tumbled more than five per cent, having lost more than eight per cent the day before.
"The Deepseek news has triggered a rethink on the AI revolution and arguably one of the pillars of the current US exceptionalism," said National Australia Bank's Rodrigo Catril.
"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."
However, most other Asian markets rose in limited trade ahead of the Lunar New Year break.
Hong Kong, Sydney, Singapore and Manila were up, though Wellington dipped.
Shanghai, Jakarta, Seoul and Taipei were closed.
The dollar pushed higher after the Financial Times reported that US Treasury Secretary Scott Bessent was looking to impose universal tariffs of 2.5 per cent on goods initially and lifting them by the same amount each month.
It said the move would give room for negotiations with the White House but the tariffs could go as high as 20 per cent.
The report comes after Trump rattled confidence Sunday by a row with Colombia over deportations, in which the president said he would hit the country with 25 per cent levies.
Bogota backed down after a short standoff, but analysts said the development highlighted the president's willingness to wield tariffs.
The greenback rallied against the yen, euro and sterling, while the Mexican peso and South African rand were off more than one percent each.
Investors are also looking ahead to the Federal Reserve's policy meeting this week, with hopes it will offer a fresh view of its interest rate outlook in light of Trump's tariff warnings and pledges to slash taxes, immigration and regulations.
"Data points to better inflation, continued growth but the first executive orders from the president targeting immigration could see the jobs market tighten and force up wages," TipRanks analyst Neil Wilson said.
"On tariffs, things are only just getting started. Donald Trump said he would 'rather not' impose new tariffs on China. But it's hard to see things going any other way," said Wilson.
"The reality of tariffs has not been fully priced." - AFP
