TSMC Shares Slump as Market Digest Holiday Jolt from DeepSeek

As markets returned from the holiday weekend, investors were greeted with a jolt of reality as shares of Taiwan Semiconductor Manufacturing Company (TSM) plummeted, wiping out billions in market value. The culprit? The emergence of DeepSeek, a powerful new large language model (LLM) from China, which has sent shockwaves through the tech industry and raised concerns about the future of AI dominance.

The news of DeepSeek's capabilities, not to mention the fact that it is open-source and free for anyone to use and modify, sent U.S. markets reeling. The tech-heavy Nasdaq, in particular, saw $1 trillion evaporate from its market cap as AI-adjacent stocks such as Nvidia and Broadcom were hit hard. TSMC, which supplies chips to many of these tech giants, also took a dive, with its shares losing 11% in premarket trading.

But today, some of those stocks are recovering, at least to a degree. As of the time of this writing, Nvidia shares are up about 5% over yesterday's close, while Broadcom shares are up about 3.4%. TSMC shares, however, are still down, with a 10.6% loss on the NYSE. This recovery suggests that some investors are catching on to the fact that DeepSeek's emergence may not spell the end for U.S. tech giants, but rather a new chapter in the AI race.



Investor and engineer Marc Andreessen posted on X yesterday that 'DeepSeek R1 is AI’s Sputnik moment.' This refers to the time when the Soviets leapfrogged the U.S. in the space race with the launch of the world's first satellite, a milestone that caught America off guard. DeepSeek's emergence as a similar milestone suggests that the AI landscape is about to change dramatically, with potentially significant implications for TSMC and other AI chip manufacturers.

As the market continues to digest the implications of DeepSeek's emergence, investors will be watching closely to see how TSMC and other AI chip manufacturers respond. The company's ability to adapt to this new reality and maintain its competitive edge will be crucial in determining its long-term success. In the meantime, the market's reaction to DeepSeek serves as a stark reminder of the dynamic and unpredictable nature of the tech industry.