Taiwan Semiconductor Manufacturing Company (TSM, Financial) experienced a loss of 6% in share value in trading on Monday after Taipei markets reopened due to global chip stock deterioration following DeepSeek R1 AI model disruptions of industry standards. The Taiwan Weighted Index (TWII) lost 4.4%.

A key player in the AI-driven semiconductor boom, TSMC's resale value shot up over the past year as AI chip demand surged. However, investor sentiment would turn sharply bearish when DeepSeek R1 exhibited similar performance as models created from OpenAI and Meta (META, Financial) on cheaper and older hardware.

This unexpected breakthrough led to a tech rout across the globe, as NVIDIA (NVDA, Financial), a major TSMC client, lost about $600 billion of market capitalization. If AI development now uncorks to leaner and more efficient architectures, it could now drag the overvalued chip supply chain into a prolonged correction, analysts warned.

Last week, markets reassessed the sustainability of AI infrastructure investments and fell hard, taking $1 trillion out of broader tech valuations. TSMC and its peers are under pressure to explain why their chip valuations are so premium as the dynamics of chip demand evolve.