DeepSeek Shock, Semiconductor, Power Equipment, and Nuclear Stock Prices Inevitably Decline

Hanwha Investment & Securities forecasted on the 31st that the shock caused by the Chinese AI startup DeepSeek will inevitably lead to a decline in stock prices in AI value chain sectors such as semiconductors, power equipment, and nuclear power. They analyzed that taking a neutral position on semiconductors is appropriate.

Last weekend, China's AI company DeepSeek announced that it achieved performance comparable to ChatGPT at about 1/20th of the previous cost. The idea that the cost of training AI could drastically decrease caused Nvidia's stock price to plunge 17% on the 27th.

Seungyoung Park, a researcher at Hanwha Investment & Securities, said, "The impact of DeepSeek on the domestic stock market depends on whether the capital expenditures (Capex) of US big tech companies will change," adding, "If the Capex growth rate of big tech declines and more companies invest under the belief that AI can be developed at lower costs, it will be negative for the domestic stock market. This is because the market targeted by domestic semiconductor companies led by SK Hynix is a high value-added market, while Chinese semiconductor companies are penetrating the legacy semiconductor market."

So far this year, as the KOSPI rebounded 5.7%, SK Hynix rose 27.1%, and HD Hyundai Electric increased by 16.5%. Park said, "When Microsoft announced on the 4th that its 2025 Capex guidance would be $80 billion, 44% higher than last year, it was expected that big tech Capex would continue to drive stock market growth this year. However, the generalization of AI is not positive for the overall domestic stock market."

He expressed the opinion that it is necessary to take a neutral position on semiconductors. Park explained, "It is risky to abruptly turn negative on the domestic stock market. It is impossible to predict whether Microsoft, Amazon, Alphabet, and others will reduce their Capex, and it will take time for them to make such decisions. For now, it is appropriate to keep both possibilities open and maintain a neutral position on semiconductors."

When the stock market opens on the 31st after the long holiday, a decline in AI-related stocks is expected. Park said, "The price of SK Hynix's Global Depositary Receipts (GDR) fell 10.7% from 150 euros on the 24th to 134 euros on the 29th. Considering the won-euro exchange rate, the closing price on the 29th was 201,304 won, which is 8.9% lower than the Korean market's closing price of 221,000 won on the 24th," adding, "When the domestic stock market opens on the 31st, a decline in stock prices related to the AI Capex value chain, such as semiconductors, power equipment, and nuclear power, seems inevitable."