SHANGHAI: US stock index futures tumbled in early Asian trading hours yesterday amid concerns that an artificial intelligence (AI) model from China’s DeepSeek may disrupt the tech market.
S&P 500 futures fell as much as 1% as in Hong Kong, while contracts on the Nasdaq 100 dropped as much as 1.9%.
Losses extended from last Friday, when US equities slumped in cash trading, cooling off after gains as President Donald Trump took office.
Stocks in Hong Kong climbed yesterday, with the Hang Seng Tech Index rising as much as 2% ahead of Lunar New Year holidays this week.
In Tokyo, shares of Advantest Corp, a key Nvidia supplier, slid as much as 8.6%, while Disco Corp slid 2.9%. Markets were closed in Taiwan and South Korea.
DeepSeek unveiled an updated AI model last week that it said was competitive with OpenAI’s technology.
Buzz grew over the weekend about reports of the product being cost-effective while running on reduced-capability chips, potentially raising questions over the dominance of US tech firms including Nvidia Corp.
The DeepSeek product “is deeply problematic for the thesis that the significant capital expenditure and operating expenses that Silicon Valley has incurred is the most appropriate way to approach the AI trend”, said Nirgunan Tiruchelvam, head of consumer and Internet at Singapore-based Aletheia Capital.
“It calls into question the massive resources that have been dedicated to AI.”
The declines in US futures come at the start of a big week for earnings from major tech companies, including Microsoft Corp and Apple Inc. Profit growth is expected to have slowed while valuations remain inflated, causing concern over the large AI-driven rally in the sector.
China’s AI technology had been seen as years behind US counterparts. Washington’s trade restrictions had kept the most cutting-edge chips out of China’s hands, but DeepSeek’s model was built using open source technology.
“While current leaders like Nvidia have a strong foothold, it is a reminder that AI dominance cannot be taken for granted,” said Charu Chanana, chief investment strategist at Saxo Markets.
“The emergence of China’s DeepSeek indicates that competition is intensifying, and although it may not pose a significant threat now, future competitors will evolve faster and challenge the established companies more quickly.
“Earnings this week will be a huge test,” added Chanana.
Masayuki Murata, general manager of balanced portfolio investment at Sumitomo Life Insurance Co said big tech companies have spent a fortune on AI, almost to the scale of a government budget, but there’s been a question around whether there will be returns that match their size of investments,” he said.
DeepSeek is likely triggering losses in tech shares, said Masayuki.
“This is all DeepSeek issues so far today, but it is very hard to tell how impactful things really are from this,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors Pte.
“It’s very clear that anything that’s overheated like Fujikura and Furukawa are getting the wind knocked out of them.” — Bloomberg
