DeepSeek’s AI Shockwave and Fed’s Steady Hand Keep Asian Markets Cautious Amid CNY Lull
HONG KONG, Jan 30 – Asian markets remained mixed on Wednesday in a holiday-thinned session as investors weighed the impact of robust US tech earnings against lingering uncertainty sparked by China’s DeepSeek disrupting the artificial intelligence (AI) landscape.
With many regional markets closed for the Lunar New Year break, investor reaction was muted following the US Federal Reserve’s widely expected decision to hold interest rates steady, signaling that further cuts were not on the horizon.
AI Disruption Reshapes Market Sentiment
Earlier in the week, trading floors were shaken when DeepSeek unveiled a chatbot rivalling the capabilities of leading US AI pioneers—at a fraction of their investment costs. This sent shockwaves through the sector, triggering a sharp selloff among tech giants.
Chip powerhouse Nvidia bore the brunt of the turmoil, shedding nearly $600 billion in market value, while other major AI players and semiconductor firms also suffered steep losses. Though some of those losses have since been clawed back, the incident reignited concerns over sky-high tech valuations and the sustainability of AI investments.
“The AI sector remains under pressure, with bearish sentiment waiting to pounce at the first sign of weakness,” noted Stephen Innes of SPI Asset Management. “The argument that tech stocks are dangerously overvalued has gained even more traction after Monday’s upheaval.”
Tech Earnings Provide a Mixed Picture
The latest batch of earnings reports from US tech heavyweights injected fresh energy into the market. Meta (Facebook’s parent), IBM, and Tesla posted solid results, offering reassurance amid AI-related volatility. However, Microsoft disappointed investors, adding to the sector’s cautious outlook. Apple is set to report earnings on Thursday, keeping traders on edge.
Divergent Asian Market Reactions
Following Wall Street’s negative lead, Asian markets delivered mixed performances. Tokyo and Sydney gained ground, while Wellington, Manila, and Jakarta slipped as investors assessed the evolving macroeconomic landscape.
The Fed’s decision to keep rates unchanged had little immediate impact. However, analysts noted a subtle shift in the Fed’s language, with officials stating that inflation “remains somewhat elevated”—removing a previous reference to progress toward the 2% target.
Fed Chair Jerome Powell reinforced a measured stance, saying, “With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust.”
Meanwhile, former President Donald Trump reignited his criticism of the central bank, demanding an immediate rate cut and blaming policymakers for failing to control inflation. Powell declined to engage, stating it was “not appropriate” for him to comment on political rhetoric, instead emphasizing the Fed’s focus on economic data.
As the earnings season unfolds and AI competition intensifies, investors remain watchful, bracing for further market volatility in the weeks ahead.