Singapore’s Data Centre REITs Face Turbulence as DeepSeek Disrupts AI Landscape

SINGAPORE - The emergence of Chinese AI firm DeepSeek has sent shockwaves through the tech sector, leading analysts to warn of potential repercussions for companies within the broader artificial intelligence ecosystem, including those based in Singapore.

In an unprecedented turn of events, Nvidia's market value plummeted by a staggering US$589 billion (approximately S$796 billion) on January 27 – the largest loss ever recorded for a single stock on Wall Street. This dramatic decline has raised concerns amongst investors and analysts alike, particularly for data centre-related Real Estate Investment Trusts (REITs) in Singapore, which experienced significant losses on the same day.

On January 27, Keppel DC REIT saw its shares fall by around 8%, closing at S$2.09. Similarly, Digital Core REIT's stock dropped approximately 6% to US$0.545. Mapletree Industrial Trust and CapitaLand Ascendas REIT also struggled, losing 2.7% and 0.8%, respectively.

However, there seemed to be a slight recovery for these REITs on January 28, with Keppel DC REIT regaining 2.9% to close at S$2.15 and Digital Core REIT increasing by 0.9% to US$0.55. Mapletree Industrial and CapitaLand Ascendas followed suit with minor gains as well.

DeepSeek has emerged as a formidable competitor in the AI landscape, quickly rising to the top of the Apple Store's download charts. The platform is being lauded for its ability to compete with renowned AI models from OpenAI and Meta, but at a lower cost and reduced energy consumption. This development has led RHB analyst Vijay Natarajan to express concern regarding the implications for the entire AI ecosystem.

Natarajan noted that the viral success of DeepSeek has prompted a recalibration of market expectations for AI, with a recent surge across the sector preceding this downturn making AI-related firms susceptible to profit-taking and short-term corrections. He emphasized that the capability to achieve advanced AI performance with cost-effective hardware could undermine the future demand outlook for premium data centres.

Morningstar equity analyst Xavier Lee echoed these sentiments, predicting that if DeepSeek's claims hold true, it could drastically reduce the costs associated with building AI systems. The implication is clear: lower investment in AI as firms reassess the viability of capital expenditures against projected returns, leading to intensified competition in an already crowded market.

While the dip in market performance has raised eyebrows, some analysts believe the market reaction may be overblown. Natarajan commented that despite the current wave of uncertainty, it's still early in the evolution of DeepSeek's technology and its potential impact on the industry remains to be fully understood.

As the AI landscape continues to evolve with emerging players like DeepSeek, investors and industry stakeholders will be closely monitoring market trends and adapting their strategies to navigate the shifting tides effectively. Will this new player reshape the AI ecosystem, and what does that mean for Singapore's data centre sector? Keep an eye on this developing story for more insights!