Market Turmoil: AI Ecosystem in Singapore Feels the Heat
Stock Market Wipeout
Analysts warned that companies in the artificial intelligence (AI) ecosystem – including in Singapore – could be hit after the rise of Chinese AI firm DeepSeek caused a meltdown in US tech stocks. Nvidia on Monday (Jan 27) suffered a wipeout of nearly US$600 billion in its market value – the most for any stock ever on Wall Street.
Impact on Singaporean Data Centre-Related Reits
Data centre-related real estate investment trusts (Reits) in Singapore already fell on Monday on the back of the saga surrounding DeepSeek. Keppel DC Reit dropped about 8 per cent to S$2.09 by Monday’s close, with 45 million shares traded. Digicore Reit fell around 6 per cent to US$0.545, with 8.7 million shares changing hands. Mapletree Industrial Trust lost 2.7 per cent to S$2.14, with 22.3 million shares transacted, while CapitaLand Ascendas Reit declined 0.8 per cent to S$2.56 with 13.3 million shares traded.
Recovery on Tuesday
By Tuesday morning, the Reits have pared some losses, with Digicore clawing back 0.9 per cent, Keppel DC rising 3.4 per cent, Mapletree up 0.5 per cent, and CapitaLand Ascendas jumping 3.1 per cent.
Analyst Insights
RHB analyst Vijay Natarajan said, "The announcement of DeepSeek advancement seems to have resulted in a recalibration of market outlook and earnings expectations across (the) entire AI ecosystem today. This coupled with (a) recent sharp rally across (the) sector makes AI-related beneficiaries vulnerable for profit taking and short-term corrections." He noted that this development has also had an impact on all data centre-related Singapore Reits such as Keppel DC Reit, Digital Core Reit and Mapletree Industrial Trust, on concerns that AI capabilities could be achieved with affordable and accessible hardware solutions, thereby dampening the optimistic demand outlook for high-quality data centres.
Morningstar equity analyst Xavier Lee said, "If what DeepSeek says is accurate – that one can build a solid AI system on limited cost – investment in AI is likely to drop and it opens up to more competition. This is likely to curtail investment as some companies may decide that the returns won’t justify the capex."
Conclusion
The market correction seems "slightly overdone" as it is still early days in this development. The impact on AI-related companies in Singapore is a concern, and it remains to be seen how the market will respond in the long term.
FAQs
Q: What is the impact of DeepSeek on the AI ecosystem?
A: DeepSeek’s rise has caused a recalibration of market outlook and earnings expectations across the entire AI ecosystem.
Q: How did Singaporean data centre-related Reits perform?
A: Keppel DC Reit, Digicore Reit, Mapletree Industrial Trust, and CapitaLand Ascendas Reit all fell on Monday, with some partial recovery on Tuesday.
Q: What are analysts saying about the impact on AI-related companies?
A: RHB’s Natarajan believes that AI-related beneficiaries are vulnerable for profit taking and short-term corrections. Morningstar’s Lee believes that a lower cost of building AI will directly affect companies, curtailed investment, and increased competition.
