The shockwaves from China's artificial intelligence (AI) startup DeepSeek during the Lunar New Year holiday hit the domestic stock market on the 31st. The semiconductor sector, including Samsung Electronics and SK hynix, showed weakness, while the stock prices of corporations investing in AI software, such as NAVER and Kakao, surged.
Securities firms have begun analyzing the emergence of DeepSeek, which has upended the global tech industry. While there are differences in opinion, the prevailing view is that DeepSeek's appearance will not completely overturn the existing landscape of the global AI industry. Most believe the growth trend of existing big tech companies will continue.
SK hynix shares traded at 200,000 won on the KOSPI market at 10:52 a.m. on the 31st. The stock price dropped by 9.5% (21,000 won) from the previous trading day. At one point, the 200,000 won mark was breached. Meanwhile, Samsung Electronics’ stock price also fell by 2.42% (1,300 won) to remain at 52,400 won.
Previously, the competitiveness of the AI industry was thought to depend on the AI infrastructure, which requires investments of hundreds of trillions of won. However, analyses suggest that it may be possible to create efficient AI models at low costs without massive investments, thanks to DeepSeek. NVIDIA, which had previously led the AI infrastructure buildout, saw a sharp drop in its stock price, and as the domestic stock market opened on the 31st, semiconductor-related stocks fell.
In contrast, the stock prices of NAVER and Kakao soared. Kakao's stock rose by about 8% compared to the previous trading day, while NAVER's stock price increased by around 5%.
The cost-effectiveness of DeepSeek is cited as a background for the movements in these stock prices. DeepSeek claims to have developed the AI model "R1" at an expense of $5.58 million, which is one-tenth of the training costs incurred by Meta Platforms for its latest AI model, Llama 3.
DeepSeek also utilized NVIDIA's H800, which was downgraded for export to China, to create R1, and it is said to have performance that does not lag behind OpenAI's O1 model.
Concerns arose that the demand for NVIDIA's high-performance, high-expense semiconductors might not be as great as expected, leading to a downturn for SK hynix and Samsung Electronics, which supply high-bandwidth memory (HBM). Goldman Sachs noted that "changes in HBM demand after 2026 could affect the valuation of South Korean memory semiconductor suppliers negatively in the short term."
In particular, if the U.S. strengthens semiconductor regulations against China due to the DeepSeek case, the burden on domestic semiconductor corporations could increase. Song Myung-seop, a researcher at iM Securities, stated, "If the U.S. government prohibits the future sales of NVIDIA's H800 and H20 graphics processing units (GPUs) intended for China, it will not only negatively impact NVIDIA but also the South Korean DRAM companies supplying HBM."
However, many believe that the demand for AI semiconductors will inevitably continue to grow in the medium to long term. Meta Platforms and Microsoft, which released their results during the Lunar New Year holiday, also announced they would maintain this year's investment scale in AI facilities (CAPEX). Koh Young Technology's researcher stated, "Despite still needing technological advancements to achieve artificial general intelligence (AGI), the competitive dynamics of big tech will also persist," adding, "In a trend of expanding CAPEX for market dominance, a favorable environment for semiconductors and hardware is expected to continue."
Meanwhile, expectations for AI software corporations have increased due to the emergence of DeepSeek. There is hope that achievements can be realized without astronomical expenses for building AI semiconductors and data centers. This is the backdrop for the surge in stock prices of NAVER and Kakao.
Han Ji-young, a researcher at Kiwoom Securities, stated, "The DeepSeek incident did not disrupt the AI cycle," adding, "In the short term, it has shifted the narrative from 'the exclusive growth of AI hardware companies like NVIDIA' to 'the improvement of profitability for AI software companies due to declining AI expenses.'"
Views also exist that the software corporations are likely to seize the leading position based on industry trends observed during the technological innovation process. Kim Seong-hwan, a researcher at Shinhan Investment Corp., noted, "In the years 1 to 2 after the tech bubble and cloud cycle, hardware and semiconductors were always strong, and then, as technology unit prices plummeted destructively, demand spread, resulting in software often taking the lead."
Even amid a sharp decline in semiconductor corporations' stock prices on the New York Stock Exchange, IBM and SAP showed strength, and Reddit reached a new all-time high. The key issue is whether domestic software corporations can also introduce AI-related services.
Hong Kong-based CLSA stated, "We believe the emergence of DeepSeek brings us one step closer to widespread AI utilization," while also expressing skepticism about whether Korean internet corporations will have competitiveness compared to the many AI-based services and applications expected to emerge in the future.