SK hynix, Samsung shares drop after DeepSeek AI shock

Shares of South Korean chipmakers SK Hynix and Samsung Electronics, which are key suppliers to Nvidia Corp, tumbled when they resumed trading, days after Chinese start-up DeepSeek shocked the artificial intelligence (AI) world.

The surprising news that DeepSeek’s new AI model was potentially more advanced than expected, and at a much lower cost, caused a rout in global chip stocks while South Korea was shut for the Lunar New Year. Shares of Nvidia and others have recovered to different degrees, but investors are still on edge.

“The talk among traders is whether this is a temporary shake-down or something more permanent,” said Mr Jung In Yun, chief executive at Fibonacci Asset Management Global.

“As the focus will now be fixed on the cost to develop AI tools – with much doubt whether we really needed expensive semiconductor chips in the first place – the broad market sell-off in the semiconductor segment is inevitable.”

Despite SK Hynix reporting a more than twentyfold increase in quarterly operating profits in January – beating Samsung Electronics’ earnings for the first time – its shares fell 9.6 per cent at the close of Jan 31 as investors took profit.

Samsung Electronics on Jan 31 obtained approval to supply a less advanced version of its high-bandwidth memory (HBM) chips to Nvidia, according to Bloomberg, citing people familiar with the matter.

The South Korean chipmaker’s eight-layer HBM3E – less advanced than cutting-edge 12-layer parts – was cleared by Nvidia in December, said the sources who asked not to be named as the information is private. Those chips are going into Nvidia’s less powerful AI processors tailored for the Chinese market, one of the sources said.

Nvidia’s approval has been long in the works, as Samsung Electronics races to catch up with SK Hynix, Nvidia’s go-to partner for supplying the most advanced high-bandwidth memory to pair with its AI chips.

Representatives for Samsung Electronics and Nvidia declined to comment.

The eight-layer HBM3E is suitable for mainstream high-performance applications such as gaming, general AI tasks and professional content creation, offering a balanced combination of memory capacity and speed.

In comparison, the 12-layer HBM3E provides massive memory capacity, ultra-high bandwidth and performance suited for data-intensive tasks such as large-scale AI and machine learning training, scientific simulations and supercomputing, where the increased layers help to handle large datasets and complex algorithms more effectively.

Shares of Samsung Electronics fell by more than 2.4 per cent at the Jan 31 close in Seoul, stung by the DeepSeek news as well as its report of smaller-than-expected profit for the December quarter.

The chipmaker said operating profit fell to 6.5 trillion won (S$6 billion) in October-December, from 9.18 trillion won in the previous three months.

The firm said the fourth-quarter fall-off was down to “soft market conditions, especially for IT products, and an increase in expenditures, including research and development”, as well as the “initial ramp-up costs to secure production capacity for cutting-edge nodes”. Bloomberg