DeepSeek can be built more cheaply and take up less power.

Analysts warned that companies in the artificial intelligence (AI) ecosystem – including in Singapore – could be hit after the rise of Chinese AI firm DeepSeek caused a meltdown in US tech stocks. (businesstimes.com.sg)

Nvidia on Monday (Jan 27) suffered a wipeout of nearly US$600 billion in its market value – the most for any stock ever on Wall Street.

Data centre-related real estate investment trusts (Reits) in Singapore already fell on Monday on the back of the saga surrounding DeepSeek.

DeepSeek soared to the top of Apple Store’s download charts, as an alternative that is said to be able to perform on a par with Open AI and Meta’s models – and can be built more cheaply and take up less power.

“The announcement of DeepSeek advancement seems to have resulted in a recalibration of market outlook and earnings expectations across (the) entire AI ecosystem today,” RHB analyst Vijay Natarajan told The Business Times on Monday.

“This coupled with (a) recent sharp rally across (the) sector makes AI-related beneficiaries vulnerable for profit-taking and short-term corrections,” he said.

This development has also had an impact on data centre-related Singapore Reits such as Keppel DC Reit, Digital Core Reit and Mapletree Industrial Trust, noted Natarajan.

“(That’s) on concerns that AI capabilities could be achieved with affordable and accessible hardware solutions, thereby dampening the optimistic demand outlook for high-quality data centres,” he added.

Morningstar equity analyst Xavier Lee said that a lower cost of building AI will have more developers “building onto the technology”, making AI tools better and more competitive.

“If what DeepSeek says is accurate – that one can build a solid AI system on limited cost – investment in AI is likely to drop and it opens up to more competition. This is likely to curtail investment as some companies may decide that the returns won’t justify the capex,” he told BT. 

“Some companies may proceed with their investment plans but monetisation could be in question,” added Lee.

Companies which don’t see the returns may then abandon their pursuit, much like how Apple and Dyson ceased spending on producing electric vehicles as the space was too competitive, and returns were in question, he said.

Are markets overreacting, however? RHB’s Natarajan believes the market correction seems “slightly overdone” as it is still early days in this development.

Markets abroad

Shares of companies linked to AI supply chains elsewhere also fell on Monday, such as chip stocks in Japan, and data centre Reits elsewhere.

Shares of Dutch semiconductor giant ASML dropped around 7 per cent on Monday by the close of Europe’s trade, and US-listed shares of Taiwan Semiconductor Manufacturing Company plunged around 13 per cent.

“DeepSeek shows it’s possible to use less powerful chips to create similarly powerful models,” said Morningstar in a Tuesday note.

But it was still bullish on AI investments.

“For semi equipment names in general, DeepSeek could be a perfect excuse for the US to launch even tighter controls over the supply chain. While there will be elevated short-term volatility as demand may fluctuate with efficiency gains and wider adoption, we’re bullish over the long term as wider adoption should win out, and lead to sustainable AI investments,” said Morningstar equity analyst Phelix Lee.