Data Centre Stocks May Get a Boost from DeepSeek
Market Volatility Linked to AI Chip Restrictions and Stargate Initiative
PETALING JAYA: Data centre-related stocks, which have been battered recently, may receive a reprieve from Chinese artificial intelligence (AI) sensation DeepSeek.
Moderating Factor in AI Chip Restrictions
MIDF Research attributed the recent market volatility to external factors such as the AI chip restrictions imposed by the outgoing Biden administration and concerns surrounding the Stargate initiative, a US$500 billion plan backed by Microsoft and Meta to expand data centres (DCs) in the US. The research house believes that DeepSeek’s emergence could moderate the impact of these restrictions.
DeepSeek’s AI Model Achieves ChatGPT-Level Performance
DeepSeek’s AI model is reported to have achieved ChatGPT-level performance with a fraction of the advanced Nvidia chips required by other AI models. Its recently launched free AI assistant has overtaken US rival ChatGPT in downloads from Apple’s app store. This has prompted global investors to dump US tech stocks, wiping US$593 billion off Nvidia’s market value in a record one-day loss for any company on Wall Street.
Support for Data Centre Expansion
If DeepSeek’s efficiency claims prove valid, US companies would be able to achieve the same processing power using significantly fewer graphics processing units. This could support the expansion of DCs in Malaysia or enable existing facilities to scale up, offsetting potential disruptions caused by AI chip limitations.
Not Solely Reliant on AI Chips
MIDF emphasized that the DC sector is not solely reliant on AI chips. DCs serve various functions, such as providing resilience against natural disasters through geographically distributed infrastructure. For example, a backup DC in Malaysia could mitigate service disruptions if an undersea fibre-optic cable connecting a US DC fails.
Long-Term Attractiveness of Malaysia as a DC Hub
Malaysia remains an attractive destination for data centre investments, said MIDF Research. The country’s long-term attractiveness is underscored by strong job flows, ongoing mega infrastructure projects, and sustained private-sector investments. Key government initiatives, such as the Johor RTS Link and Penang LRT, will provide further support for the sector.
Conclusion
In conclusion, the emergence of DeepSeek may moderate the impact of AI chip restrictions, supporting the long-term attractiveness of Malaysia as a DC hub. The data centre sector is not solely reliant on AI chips, and the country’s infrastructure projects and government initiatives will continue to drive growth.
Frequently Asked Questions
Q: What is the impact of AI chip restrictions on data centre stocks?
A: The restrictions have caused market volatility and concerns about the country’s diminished role in the global DC market.
Q: What is DeepSeek, and how does it affect AI chips?
A: DeepSeek is a Chinese AI model that achieves ChatGPT-level performance with a fraction of the advanced Nvidia chips required by other AI models. Its efficiency claims could support the expansion of DCs or enable existing facilities to scale up, offsetting potential disruptions caused by AI chip limitations.
Q: What are the long-term prospects for data centre stocks?
A: Despite recent market volatility, Malaysia remains an attractive destination for data centre investments, driven by strong job flows, ongoing mega infrastructure projects, and sustained private-sector investments.