shock as tsmc adr plummets due to chinese ai rival
Taipei, Monday, 27 January 2025.
Taiwan Semiconductor Manufacturing Company (TSMC) faced a significant setback as its American Depositary Receipts dropped over 9% in pre-market trading. This sudden decline was triggered by the launch of DeepSeek, a Chinese AI model that rivals the capabilities of OpenAI’s products. The development sent shockwaves through the technology sector, highlighting the competitive pressure from new players in the industry. Investors are concerned about the potential impact on TSMC and other semiconductor firms, given the increasing competition and innovation from Chinese companies. The tech market is experiencing heightened volatility as AI advancements in China challenge existing industry leaders. This event underscores the shifting dynamics in the global technological landscape, where emerging AI technologies can rapidly influence market perceptions and valuations.
Market reaction and industry impact
TSMC’s ADR experienced a steep decline of 9.8% in pre-market trading [1][2], while Nvidia shares fell 10.3% [1]. The ripple effect extended to European markets, where ASML’s stock dropped 11% to €626.30, marking its largest intraday decline since October 2023 [2]. The NASDAQ-100 futures index also showed significant weakness [2], reflecting broader market concerns about technological competition and industry dynamics.
DeepSeek’s breakthrough capabilities
The Chinese AI startup DeepSeek launched its ‘DeepSeek-R1’ model on January 20, 2025 [2][7], achieving remarkable success with cost-effective performance that matches OpenAI’s capabilities [7]. The model reached top rankings on evaluation platforms [7], demonstrating that high-performance AI development is possible without massive infrastructure investments [7]. This development has particularly alarmed Meta, whose engineers are reportedly working overtime to analyze DeepSeek’s technology [7].
Semiconductor industry disruption
The emergence of DeepSeek coincides with significant changes in the semiconductor sector, where market capitalization reached historic highs just days before this disruption [6]. A consortium of AI players has committed approximately $500 billion to semiconductor development [6], indicating massive industry transformation. Industry experts suggest this could trigger a reassessment of capital expenditure and earnings prospects across the semiconductor sector [6].