DeepSeek fallout: Investors pull plug on ASX tech stocks after US bloodbath

Australia’s listed tech stocks have copped a bloody nose following a rout in the US market overnight, brought on by revelations that a Chinese startup had made huge strides in the development of artificial intelligence.

DeepSeek took over rival OpenAI’s coveted spot as the most-downloaded free app in the US on Apple’s App Store, dethroning ChatGPT for DeepSeek’s AI Assistant.

The Nasdaq index in the US posted its biggest one-day percentage drop since December 18 after a steep sell-off in US chipmakers.

AI leader Nvidia sank 17 per cent, and it erased about $US593 billion ($944b) in stock market value, the deepest ever one-day loss for a company on Wall Street, according to LSEG data.

It was more than double the previous one-day record loss, set by Nvidia in September.

While the overall market held on to marginal gains, the ASX200-listed tech stocks followed suit, with the sector dropping almost one per cent.

Data centre operator NextDC led the retreat, down 6.6 per cent to $1.05 by 9am. Property and digital infrastructure company Goodman Group was also beaten lower, down 6.5 per cent to $2.51.

Analytics and intelligence software group Nuix, which falls outside the ASX200 with a market capitalisation of $1.8b, was smashed, tumbling 15.4 per cent to $4.57.

Megaport and WiseTech Global were also in the red.

DeepSeek’s free assistant uses cheaper chips and less data, raising questions about investor expectations that AI will drive demand along a supply chain from chipmakers to data centres.

Kim Forrest, chief investment officer at Bokeh Capital Partners, said there were still many questions about the DeepSeek model and its impact.

“Today is a drubbing for these (AI leader) stocks, but I don’t necessarily think whatever’s going to happen in the short while here — the next couple of days — is where they are ultimately valued,” she said.

Optimism over AI and gains in Nvidia and other big technology-related shares helped to drive the stock market’s sharp gains in 2024.