By Adriano Marchese

Celestica shares fell in lockstep with other tech companies Monday as China's DeepSeek low-cost AI model rattled the sector.

Shares trading in Toronto were down nearly 17% to 144.23 Canadian dollars. In New York, the stock is down 20% to $97.11.

The emergence of AI startup company DeepSeek, a competitor to OpenAI, has upended the conventional thought that companies using AI, such as Celestica, need expensive, cutting-edge computer chips that are powered by data centers and require massive energy supplies. Celestica's decline follows those of other major players in the AI world, including chipmaking giant Nvidia and Microsoft, whose stocks are down 15% and 3.5%, respectively.

Celestica, a Canadian-American supply-chain solutions company, has leaned into AI for various applications, including energy delivery and improving predictions on its platform.

For example, one of Celestica's products is the DS5000 switch, a networking device that connects servers, virtual machines and storage devices. The device was created for modern data centers, and by extension their networks, to meet the growing use of AI technology.

The company was not immediately available for comment.

As of Friday's C$174.68 close, the company's Toronto-traded shares had risen over 30% since the beginning of the year.

On Monday, Bank of Montreal analyst Thanos Moschopoulos maintained the stock rating to outperform and raised the price target on New York shares to $140 on the back of a rosier outlook for the company's "near-term and longer-term outlook for AI-related capex, and Celestica's ability to continue taking share."

Unlike many of its western rivals, DeepSeek says it uses less-advanced chips, combined with innovative model-training methods that forgo the need for expensive data and energy infrastructure.

This could change the view of high-cost investment in the sector. BMO's Moschopoulos said in his Monday report that it was Celestica's AI exposure and market position, coupled with its potential for upside to his estimates, that drove the upgrade on the stock.

Canada's tech sector was the biggest decliner mid-morning.

Write to Adriano Marchese at adriano.marchese@wsj.com

(END) Dow Jones Newswires

January 27, 2025 11:13 ET (16:13 GMT)

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