Asian equities and US stock futures faced a downturn on Monday as market participants processed the impact of DeepSeek, a Chinese AI startup’s newly unveiled free, open-source AI model designed to rival OpenAI’s ChatGPT.
This development has raised questions about the future of global tech dominance, particularly in AI, as China continues to challenge U.S. leadership in the sector.
US stock futures saw notable declines, with Nasdaq futures dropping 1.8% and S&P 500 futures falling 0.9%. In Asia, Japan’s Nikkei index lost 0.3%, reversing earlier gains, while New Zealand’s equity benchmark fell 0.6%, and Singapore’s Straits Times index was down 0.2%. Despite these declines, Hong Kong’s Hang Seng and mainland China’s blue-chip stocks posted gains, up 0.9% and 0.2%, respectively. The surprise contraction in China’s manufacturing sector didn’t significantly dampen investor sentiment in these markets.
DeepSeek’s launch has raised concerns that it could disrupt the tech landscape by challenging US dominance in AI. Yeap Jun Rong, a strategist at IG, noted that DeepSeek’s emergence could bring significant disruption, especially given China’s progress despite ongoing US restrictions on technology. This development is putting a spotlight on the lofty valuations of US tech companies, which are now under closer scrutiny.
In the currency markets, the US dollar strengthened, gaining 0.3% against the Chinese yuan in offshore trading. It also rose 0.4% versus the Australian dollar and 0.5% against the New Zealand dollar, reflecting broader concerns over US policies and global trade dynamics. Additionally, President Donald Trump’s imposition of retaliatory tariffs on Colombia related to a migrant deportation dispute further buoyed the dollar.
Despite the dollar’s recent strength, analysts like Nomura’s Naka Matsuzawa suggest that this boost might be temporary. Matsuzawa pointed out that Trump’s approach to tariffs seems more measured now, aiming to avoid inflationary pressures, which could ultimately lead to a weaker dollar in the long run.
Looking ahead, the week is set to be a significant one for markets as the US Federal Reserve and the European Central Bank (ECB) prepare to make key monetary policy decisions. However, many Asian markets are on holiday for the Lunar New Year, with South Korea, Taiwan, and mainland China closed for several days.
Crude oil prices also slipped after Trump reiterated his calls for OPEC to lower oil prices. Brent crude futures dropped 1.2% to $77.60 a barrel, while US West Texas Intermediate crude also lost 1.2%, closing at $73.78 per barrel. Meanwhile, gold saw a decline of 0.6%, trading at $2,755.85 per ounce, and Bitcoin slid 3.5% to $101,415.12, reflecting the broader risk-off sentiment across markets.
Reuters, CNBC, and Market Watch contributed to this report.