AI-Focused Stocks Hit Multi-Week Lows After Chinese Startup DeepSeek Raises Concerns

January 28, 2025 02:13 PM AEDT | By Team Kalkine Media

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AI-Focused Stocks Hit Multi-Week Lows After Chinese Startup DeepSeek Raises Concerns — Image source: shutterstock

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Highlights

AI-focused stocks in Australia fall to multi-week lows following a sharp drop in tech stocks on Wall Street triggered by concerns over DeepSeek’s low-cost AI model.

Goodman Group leads the decline with an 8.1% drop, marking its lowest point since mid-September 2024.

Brainchip and NEXTDC also see significant losses, while Citi analysts remain optimistic about demand for data center capacity.

AI-focused stocks in Australia experienced a sharp decline on Tuesday, hitting multi-week lows following a significant sell-off in U.S. tech stocks overnight. The decline was triggered by concerns that a low-cost artificial intelligence model developed by Chinese startup DeepSeek could disrupt the market, especially in data processing and AI-related services.

The Nasdaq Composite dropped 3% overnight, marking its biggest one-day percentage loss since December 18, which weighed heavily on investor sentiment in the Australian market. As a result, Australian tech stocks, particularly those linked to data centers and AI technologies, were hit hard.

Goodman Group (ASX:GMG), Australia’s largest listed property developer with significant exposure to data centers, led the fall, plunging 8.1% to its lowest point since mid-September 2024. Goodman was the fourth-biggest loser in the ASX200 index (XJO) on the day.

Other notable losses included Brainchip (ASX:BRN), which saw a steep 15.4% drop, and Appen (APX.AX), a data processing firm, which fell 3.7%. Data center developers and operators NEXTDC (ASX:NXT) and DigiCo Infra REIT (ASX:DGT) also experienced declines, with shares of NEXTDC slipping around 6% and DigiCo Infra REIT falling 11%.

Despite these losses, Citi analyst Siraj Ahmed reassured investors that the concerns surrounding DeepSeek’s AI model are unlikely to impact near-term contracts or demand for companies like NEXTDC. He predicted that hyperscalers—large-scale data center operators—would continue deploying capacity, suggesting that the fundamental demand for data centers remains intact.

The broader tech sub-index (XIJ) dropped by 1%, in contrast to the largely flat performance of the ASX200 index (XJO) overall.

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