Tuya Inc. (NYSE: TUYA) experienced a significant downturn in the pre-market session on Friday, with its stock plummeting 5.04% despite the company's recent announcement of a strategic collaboration with DeepSeek to develop AI-driven companion products.

The sharp decline comes as a surprise to many investors, given the positive nature of the news released by Tuya Smart, the company's operating entity. The collaboration aims to integrate DeepSeek's advanced AI model into Tuya's AIoT platform, potentially transforming smart home devices into emotionally intelligent companions. This move is expected to enhance user experiences and open new market opportunities in the growing field of AI-driven companionship.

However, the market's negative reaction suggests that investors may be skeptical about the immediate impact of this partnership on Tuya's financial performance. It's possible that concerns about the costs associated with developing and implementing these new AI features, or uncertainty about consumer adoption rates, are outweighing the potential long-term benefits. Additionally, broader market trends or sector-specific pressures could be contributing to the stock's decline, despite the company's efforts to innovate in the smart home space.