South Korean individual investors, who actively invest in U.S. and other foreign stocks and are known as ‘Seohak Ants,’ moved to buy U.S. semiconductor shares at lower prices after the emergence of Chinese AI startup DeepSeek shook the market, sending stocks like NVIDIA tumbling.
According to the Korea Securities Depository, S. Korean investors purchased $283.2 million worth of ‘NVDL’ on Jan. 27, with the settlement date on Jan. 29, making it the top foreign stock by net purchase volume. NVDL is an exchange-traded fund (ETF) that tracks twice the daily performance of NVIDIA’s stock.
NVDL tumbled 33.78% on Jan. 27, dropping by $24.70, as DeepSeek’s emergence rattled the market and triggered a sell-off. Despite the plunge, S. Korean investors showed strong buying interest. The ETF had fallen from $73.11 on Jan. 24 to $48.41 on Jan. 27 before rebounding to $56.88 on Jan. 28 and settling at $52.29 on Jan. 29.
The second most purchased stock by South Korean investors on Jan. 27 was NVIDIA itself. As NVIDIA’s stock price plunged 16.97% ($24.20) that day, investors in S. Korea maintained a net buying position of $222.56 million.
They also bought $174.31 million worth of SOXL, an ETF designed to triple the daily movement of the U.S. semiconductor index. SOXL also plunged 23.25% ($7.59) on Jan. 27.
Semiconductor stocks, including NVIDIA, tumbled as investors grew concerned about whether companies could justify the enormous costs of building high-performance AI systems.
DeepSeek claims it developed the open-source AI model DeepSeek-R1 in just two months with an investment of $5.58 million. That amounts to about one-tenth of the training costs for Meta Platforms’ latest AI model, Llama 3.
Despite the significantly lower investment, DeepSeek-R1′s service quality was on par with existing open-source AI models from U.S. firms. This raised concerns that AI development companies might scale back capital expenditures on infrastructure, including data centers.
However, many global investment banks believe that DeepSeek’s breakthrough will not lead to a slowdown in AI investments or a downturn for U.S. big tech companies.
Citi Securities noted that while U.S. AI firms could face challenges, access to cutting-edge semiconductors would remain a key advantage for American companies. Bernstein added that even if DeepSeek achieved equivalent performance at one-tenth the cost, such innovation was necessary, given that model training costs have been increasing tenfold annually. The firm maintained a positive outlook for AI-related stocks, including NVIDIA and Broadcom.
Wedbush Securities emphasized that U.S. big tech firms, having built extensive AI infrastructure and ecosystems, will maintain their dominance. It also expects continued capital investment not only in AI but also in robotics and autonomous driving.
Still, analysts believe DeepSeek’s impact will continue to affect the market for some time. They warn that leveraged investments could be risky, especially if stock prices swing sharply without a clear trend, which can lead to greater losses over time due to negative compounding effects.
Morgan Stanley stated that DeepSeek has demonstrated the potential to redefine the global AI technology landscape. The firm also noted that in the long run, U.S. export controls on advanced semiconductors could create an unfavorable environment for Chinese AI firms, leading to increased volatility in semiconductor and AI-related stocks.
Although the Lunar New Year holiday closures helped S. Korean investors avoid immediate volatility, stocks of companies such as Samsung Electronics and SK Hynix are expected to undergo adjustments. Goldman Sachs noted that because high-bandwidth memory (HBM) contracts are typically signed on an annual basis, any shifts in demand may not be immediately felt but could have a greater impact after 2026. As a result, the firm warned that South Korean memory semiconductor suppliers could see their valuations decline in the short term.
