On January 31, 2025, the South Korean stock market reacted positively to the recent emergence of China's open-source artificial intelligence model, DeepSeek R1, which has heightened expectations for local software companies. Shares of major players like NAVER and Kakao saw significant gains, reflecting optimism about the potential benefits of this technological advance.
By 9:59 AM KST, NAVER's stock price surged by 6.37% to 217,000 KRW, and Kakao demonstrated similar momentum with its shares rising 6.01% to 37,900 KRW. This enthusiasm among investors is largely driven by the belief, articulated by researchers, including Choi Seung-ho from Shinsang Investment & Securities, who noted, "The reason why DeepSeek has made waves in the market is due to the implication it brings—that achieving high-performance models may not require overwhelming computational resources."
This shift opens doors for the local software industry. According to Choi, if high-performance models can be developed using lower computational resources, the commercialization of software products will accelerate. This could aid South Korean firms, giving them opportunities to close the competitive gap with major tech companies globally.
While software companies thrived on January 31, semiconductor firms experienced declines, reflecting broader market concerns about AI infrastructure investment. For example, SK Hynix, which supplies high-bandwidth memory (HBM) to NVIDIA, saw its shares tumble by 8.37%, trading at 202,500 KRW. Other semiconductor giants, including Samsung Electronics and Hanmi Semiconductor, also faced losses of 2.42% and 6.72%, respectively.
Market analysts highlighted the fluctuation of major U.S. tech stocks impacting local sentiments. After the shocking drop seen on January 27, triggered by the ramifications of DeepSeek's emergence, NVIDIA saw minor recovery with its shares climbing by 0.77%. Other U.S. semiconductor firms like TSMC and Broadcom also reported gains of 2.88% and 4.51% respectively.
Analysts like Jo Byung-hyun from Daol Investment Securities noted, "While the stocks of major U.S. tech firms have shown signs of stabilizing, they have not yet recovered to prior peaks, illustrating the turbulence the sector is grappling with following DeepSeek's debut."
The developments surrounding the AI model have certainly rekindled conversations about the future of software and AI technology investment. With experts continuously weighing its impact, South Korean firms seem well-positioned to benefit from the possibilities this opens, even as caution remains around infrastructure investments for extensive AI systems.
Overall, the response of the South Korean market on January 31 serves as a bellwether for the potential changes to come within the tech industry, and encapsulates the merging paths of AI and software development as regional confidence begins to rise.