Image credit: The Byteline

Technology stocks in Asia bounced back on Wednesday, mirroring gains on Wall Street overnight as investor jitters over China's DeepSeek AI began to ease.

The initial panic that the startup’s low-cost model could shake up U.S. dominance in artificial intelligence appeared to subside, allowing markets to recover some lost ground.

The dollar remained firm, with traders rotating back into the currency from safe-haven options like the Japanese yen. It also got a lift from fresh tariff warnings from the Trump administration, adding another layer of geopolitical tension to the market landscape.

Trading volume was relatively thin in Asia due to Lunar New Year holidays that kept markets in mainland China, Hong Kong, Taiwan, Singapore, and South Korea closed.

However, Japan's Nikkei rose 0.5% as of early trading, positioning itself to break a three-day losing streak. Meanwhile, Australia’s stock benchmark climbed 0.8%, with a tech subindex surging 2.2%, reflecting a broader recovery across the sector.

Futures in the U.S. signaled a slight pullback after a strong rally on Tuesday, where the S&P 500 gained 0.9% and the tech-heavy Nasdaq soared 2%.

This rebound followed a brutal selloff earlier in the week, driven by fears that DeepSeek’s rapid rise could disrupt AI market dynamics and undermine sky-high valuations for companies like Nvidia.

“There appeared to be a level of relief in the rally, mostly because of a forming consensus that while ostensibly impressive, DeepSeek will either lack the scalability to truly disrupt the AI space or, if anything, the company’s low-cost model will actually increase demand for GPUs,” said Kyle Rodda, senior financial market analyst at Capital.com.

All eyes are now on upcoming earnings reports from tech heavyweights Meta, Microsoft, and Tesla, with investors eager to hear if executives remain committed to their aggressive spending on AI infrastructure.

The Federal Reserve is also set to announce a policy decision later in the day, though markets widely expect rates to remain unchanged.

The dollar index held steady at 107.91, following two straight sessions of gains, after ending last week lower on speculation that Trump’s tariff policies might be less severe than his campaign rhetoric suggested.

With DeepSeek no longer causing a full-scale market panic, investors are shifting focus back to corporate earnings and broader economic signals.

But as the AI race intensifies, the real test will be whether DeepSeek can maintain momentum—or if this week’s turmoil was just a preview of deeper shifts to come.

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