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.
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.
Keppel DC Reit dropped about 8 per cent to S$2.09 by Monday’s close, with 45 million shares traded. Digicore Reit fell around 6 per cent to US$0.545, with 8.7 million shares changing hands.
Mapletree Industrial Trust lost 2.7 per cent to S$2.14, with 22.3 million shares transacted, while CapitaLand Ascendas Reit declined 0.8 per cent to S$2.56 with 13.3 million shares traded.
DeepSeek soared to the top of Apple Store’s download charts, as an alternative that is said to be able to perform on par with Open AI and Meta’s models – and can be built more cheaply and take up less power.
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“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 all 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 would directly affect companies.
“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.
Are markets overreacting, however? RHB’s Natarajan believes the market correction seems “slightly overdone” as it is still early days in this development.
