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Japanese markets extended their slide on Tuesday as the heavy sell-off in technology stocks headed into a second day, driven in part by the overnight plunge in Nvidia shares.
In recent days, Chinese artificial intelligence start-up DeepSeek has stunned Silicon Valley with advances apparently achieved with far less computing power than its American rivals. President Donald Trump has called DeepSeek a ‘wake-up call’ for US industries.
Nvidia lost some $589bn of market value on Monday in a historic plunge following panic in Wall Street and Silicon Valley over DeepSeek’s threat to the continued dominance of the US in AI and the need to invest hundreds of billions of dollars in the underlying infrastructure.
The tech-heavy Nikkei 225 fell about 1.5 per cent in early trading, while the broader Topix, which is more domestic and has lower weightings for Japan’s tech exporters, traded flat.
Shares in SoftBank Group were hard hit, plunging more than 5.2 per cent in early trading on Tuesday and extending their drop this week to around 13 per cent.
Analysts said SoftBank was especially affected by the overnight 10 per cent plunge in shares of Arm Holdings — the US-listed chip design company in which the Japanese group holds an 88 per cent stake
Even after this week’s crash, SoftBank shares are more than 43 per cent higher than they were in August, said Kirk Boodry, an analyst who covers the company at Astris Advisory in Tokyo, noting the stock’s high volatility.
“It looks horrible now, but it’s probably normal for SoftBank,” he said. “It’s another of its round trips, where you get a big bump then it comes down to earth.” Boodry continues to rate the company as ‘buy’.
Last week, the company’s founder, Masayoshi Son, accompanied Trump for the unveiling of the Stargate joint venture that is to involve SoftBank, Oracle and OpenAI in a $100bn data centre investment that they said could stretch to $500bn over four years.
DeepSeek and its promise of a much lower-cost AI model, said Jefferies strategist Chris Wood, has raised the question of whether Son’s photo-op announcement “marked the peak of the AI capex boom”.
The selling in Tokyo was focused on Disco, Advantest and Furukawa Electric — stocks that had soared in recent months on an expected expanding demand for high-end chips, data centres and other AI-related industries.
Shares in Disco and Furukawa were down 5 and 7 per cent respectively on Tuesday morning. Advantest plunged over 10 per cent in the first 20 minutes of trading.
The sell-off expanded to include companies such as Mitsubishi Heavy Industries, Hitachi and Kawasaki Heavy Industries that had until recently traded higher on the bet that they would benefit from higher overall investment in AI-linked electricity infrastructure.
The US dollar recovered by 0.3 per cent against a basket of currencies in morning trading, while the yen weakened to ¥155.30 per greenback.
Hong Kong’s Hang Seng index opened up 0.4 per cent on Tuesday, led by Tencent, Alibaba and Baidu, although chipmaker SMIC was down more than 2 per cent after the open. South Korea and Taiwan are closed for the lunar new year break, while Hong Kong ceases trading at the end of the morning session.
