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Macro Intelligence: How DeepSeek is changing the AI landscape

Explore how Chinese AI firm DeepSeek is shaking up the tech landscape, impacting US tech stocks and data centre investments, with potential long-term benefits for the industry.

2025.01.30_AUS_Macro Intelligence
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      Written by Juliette Saly

      DeepSeek deep dive

      In this week’s edition of IG Macro Intelligence, we examine the Chinese artificial intelligence (AI) company DeepSeek and its implications for markets.

      AI anxiety disrupts US tech stocks

      Chinese AI startup DeepSeek has disrupted the tech landscape, triggering a sell-off in United States (US) technology stocks. DeepSeek claims it took just two months and less than $6 million to build its advanced language model, DeepSeek-R1, using Nvidia's less-advanced H800 chips.

      US President Trump described the disruption as a 'wake-up call', with the broader sell-off in tech stocks sparked by concerns that US mega-tech companies have invested excessively in AI, while the Chinese firm appears to offer a comparable service at a fraction of the cost.

      Michael Frazis told ausbiz, 'Why pay companies like OpenAI $300 a month when equivalent models can be released? And it's not just DeepSeek.This will repeatedly happen in the foundational model sector, rendering previous spending redundant.'.

      • Nasdaq 100

      The tech-heavy Nasdaq 100 tumbled 3% during Monday’s trading in the US, marking its steepest drop in six weeks, and reducing its total market value by nearly $1 trillion from Friday’s close.

      Nasdaq daily chart

      Nasdaq 100 daily chart Source: Google
      Nasdaq 100 daily chart Source: Google
      • Nvidia

      Nvidia shares plunged almost 17%, marking their biggest one-day loss since the onset of the Covid-19 pandemic in March 2020. Nvidia lost almost $600 billion in market value, the largest in US stock market history, surpassing its own previous record of a $279 billion wipeout in September.

      Nvidia daily chart

      Nvidia's daily chart Source: Google
      Nvidia's daily chart Source: Google

      Deep impact

      Losses on the Australian sharemarket were more contained as markets reopened following the Australia Day holiday, largely due to limited exposure to AI and tech stocks.

      Despite a note from Citi analysts suggesting that DeepSeek's developments would have limited impacts on near-term demand for data centres, both the real estate and tech sectors experienced declines. Citi analysts maintain that leading AI companies are unlikely to abandon advanced graphical processing units (GPUs). Instead, they expect DeepSeek to drive increased global demand for data centres.

      ASX 200 sector heat map chart

      ASX 200 sector heat map Source: Australian Securities Exchange
      ASX 200 sector heat map Source: Australian Securities Exchange

      Uranium miners faced pressure as DeepSeek raised concerns among investors about the potential for AI-driven efficiency to reduce demand for nuclear power, coinciding with new supply from industry leader Cameco coming online.

      Deep Yellow 15 minute chart

      Deep Yellow 15 min chart Source: IG
      Deep Yellow 15 min chart Source: IG

      Real estate stocks also suffered, led by an 8% drop in industrial property manager Goodman Group.

      David Lane from Ord Minnett remains positive on the outlook: 'The real esate sector is still hot, with more availability now. Long-term, data centres will remain important despite recent events.'

      Goodman Group daily chart

      Goodman Group daily chart Source: IG
      Goodman Group daily chart Source: IG

      The average target price for Goodman Group is a 'buy', according to Refinitiv, with a target price of $38.20, suggesting a 9% upside.

      Citi has a 'buy' rating for Goodman, with a price target of $40, representing a 14.3% upside from current levels. However, analysts at Morningstar describe Tuesday’s decline as a 'reality check' on the data centre hype. They have retained a fair value estimate on the stock with a price target of $27, down from Tuesday’s $35 closing price.

      Shares in data centre operator NextDC were heavily affected. Despite its more than 7% slump following the DeepSeek shock, analysts remain positive about the outlook for NextDC.

      NextDC share price target chart

      NextDC share price target chart Source: FNArena
      NextDC share price target chart Source: FNArena

      The average price target on the stock is $19.31, indicating a 31% upside. Three of the 15 analysts surveyed by Refinitiv suggest buying the stock, while the other 12 have a 'strong buy'.

      However, ASX Tradewatch data suggests investors should proceed with caution, as shares appear weak with little demand from investors, as evidenced by the 200-day moving average (MA) currently sloping downwards.

      NextDC analyst recommendations chart

      NextDC analyst recommendations chart Source: Refinitiv
      NextDC analyst recommendations chart Source: Refinitiv

      For DigiCo, UBS has initiated coverage of the stock with a 'buy' rating and a $5.60 target price, representing more than a 37% upside.

      The analysts note the real estate investment trust (REIT) is a diversified owner, operator, and developer of data centres, with capacity for future expansion.

      DigiCO daily chart

      DigiCo daily chart Source: IG
      DigiCo daily chart Source: IG

      AI adoption: winners and losers

      Shawn Hickman from Market Matters says the road to AI adoption is long, with room for more winners and losers:

      'Big valuation shifts in AI are happening. First-player advantage doesn't guarantee future success. Remember the shift from Nokia to iPhone. Just because people have talked about AI and AI companies have progressed very well in the last year or two, doesn't mean they'll be leading in five years.'

      This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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