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(Bloomberg) -- Shares of Japanese semiconductor-related companies including Advantest Corp. and Disco Corp. extended Monday’s drop after the release of Chinese AI model DeepSeek prompted a selloff in US tech stocks.
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Advantest, which supplies testers to Nvidia Corp., dropped as much as 11%, heading for a two-day decline of 18%, the most since a market rout in August. Chip equipment maker Disco slid 9.5%, while SoftBank Group Corp. retreated 6.7%. The latter has erased its gains from last week, when it rallied on news the company plans to commit $19 billion to an investment plan for artificial intelligence infrastructure in the US.
Other chip-related firms including Lasertec Corp., Screen Holdings Co. and Tokyo Electron Ltd. all fell over 4% at one point. In the US, Nvidia lost almost $600 billion in market capitalization on investor concern about competition from DeepSeek, which is widely seen as a low-cost rival to the US’s OpenAI and Meta Platforms Inc.
“The fact that the cost of AI is decreasing is a negative for AI-related stocks, and it’s an irreversible trend,” said Ryoutarou Sawada, an analyst at Tokai Tokyo Intelligence Laboratory. “The cost of semiconductors, which are involved in creating generative AI, will also fall, which is bad news for Japanese makers of chip equipment.”
The impact of DeepSeek “is going to force a pause in some commercial AI infrastructure plans” and “should cause a slowdown” in AI-related investment, Pelham Smithers, an analyst at UK firm Pelham Smithers Associates, wrote in a research note.
That’s delivering a blow to power generators, who had been expecting AI investment to fuel electricity demand from power-hungry data centers. Shares of Kyushu Electric Power Co., Tokyo Electric Power Co. and Kansai Electric Power Co. fell over 2% Tuesday.
“It’s only natural that selling will spread to the periphery of the AI sector, like power generation stocks,” said Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Asset Management.
Mitsubishi Heavy Industries Ltd., whose shares jumped last week on hopes of an AI-driven demand boost for its US gas turbine business, plunged 8.6% at one point, the most since August.
Shares of Furukawa Electric Co. and Fujikura Ltd., which manufacture cables for data centers, also declined over 8.5%. Fujikura, Furukawa Electric, Advantest, Mitsubishi Heavy and SoftBank were all among the worst performers on the Nikkei 225, which was down 0.6% as of 11:30 a.m. in Tokyo.