Shares of artificial intelligence driven-electronics manufacturing services (EMS) firms, including Dixon Technologies, Kaynes Technology, Netweb Technologies, and MIC Electronics, plummeted on January 28. These stocks are facing a ripple effect from a selloff in the shares of US chipmaker Nvidia, triggered by the emergence of Chinese AI start-up DeepSeek. DeepSeek claims to offer a free alternative to ChatGPT, utilising models that are cheaper to establish and require fewer chips.
Shares of Kaynes Tech witnessed the steepest fall, plummeting nearly 20 percent, also dragged down by a downward revision in the company's FY25 revenue guidance. Other names like Dixon Tech, and MIC Electronics dropped around 5 percent each. Shares of Netweb Technologies were also locked in the 10 percent lower circuit, also impacted by one and a half year lock-in expiry.
The concerns surrounding DeepSeek triggered a 17 percent dive in Nvidia's shares overnight, wiping out $589 billion from its market capitalisation, marking the biggest single day loss in US history . Other tech stocks, particularly those that are AI-related, were also hammered, contributing to a 3 percent decline in the Nasdaq Composite, the tech-heavy index.
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Indian EMS stocks are often influenced by the performance of the Nasdaq Composite due to their significant exposure to the technology sector, with many of these firms manufacturing electronics and components for global tech giants. As a result, the stock performance of these companies closely mirrors that of the Nasdaq. Also, companies like Netweb also work as manufacturing partners for Nvidia, which further intensified the concerns.
Stock-specific triggers
In addition to mounting concerns over growing competition in the AI space, shares of Netweb Technologies also bore the brunt of the one and a half year lock-in expiry, which came into effect on Monday. The lock-in expiry made as many as 1.1 crore shares of the company, equivalent to a 20 percent stake in Netweb to become eligible for trading.
It should be noted, however, that the expiration of the shareholder lock-in does not imply that all the shares will be sold in the open market; it simply means they become eligible for trading.
On the other hand, Kaynes Tech shares suffered from the downward revision of the company's FY25 guidance. The management revised its FY25 revenue guidance down to Rs 2,800 crore from the earlier projection of Rs 3,000 crore. This adjustment was due to delays in executing select industrial orders worth Rs 100 crore in the December quarter, which are now expected to be completed in the March quarter.
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