[Deepseek is a new AI chatbot invented by China. Photo credit: Pxhere]

The Chinese AI chatbot DeepSeek” is facing bans from South Korean governmental organizations over security concerns, with fears that sensitive data could be leaked to the Chinese government. 

In South Korea, semiconductor stocks like SK Hynix and Samsung Electronics experienced declines, while AI software companies like Naver and Kakao benefited from the shifting market sentiment. 

This situation underscores the rising geopolitical tensions surrounding AI, data privacy, and technology regulation, with further developments likely to shape global AI policies. 

On February 7th, the Korea Exchange reported that GRT, a functional new material company, closed at 4,650 KRW, down 8.82% on the KOSDAQ (Korean Securities Dealers Automated Quotations) market. 

GRT secured a 90 million-dollar contract with Inspur, a major Chinese AI server manufacturer with over half the Chinese AI server market. 

DeepSeek is reportedly using Inspur’s servers. 

The downturn in “DeepSeek-related stocks” is largely attributed to widespread restrictions on the chatbot in South Korea due to concerns over potential leaks of sensitive classified information. 

The Ministry of Foreign Affairs, the Ministry of National Defense, and the Ministry of Trade, Industry, and Energy are blocking access on the 5th, and most economic and social ministries have now imposed or are planning similar sanctions. 

Public institutions, financial firms, and private companies are also tightening restrictions.

On February 7, the South Korean stock market appeared to have recovered from DeepSeek and US President Donald Trump’s tariff measures. 

However, investors remained cautious before the US employment data was released. 

Foreign and institutional investors sold off nearly 400 billion KRW worth of stocks in the KOSPI market due to concerns that the strong US employment figures could pressure the market amid ongoing tariff uncertainties. 

Major stocks declined, including Samsung Electronics and SK Hynix, while Samsung Biologics increased to 6.52%, reclaiming the third-largest market cap. 

Energy and nuclear-related stocks also dropped due to weak deep-sea gas exploration results and Korea Hydro & Nuclear Power's withdrawal from a major Slovenian nuclear project. 

The KOSDAQ index climbed 0.35% to 742.90, driven by gains in semiconductor and glass substrate stocks following Samsung’s announcement of its entry into the sector. 

However, some previously high-performing stocks faced declines due to profit-taking. 

Analysts noted that investors were in waiting mode ahead of key US economic data, including inflation reports. 

In conclusion, the controversy regarding DeepSeek highlights its impact on South Korea’s economy and stock market, particularly the KOSPI and KOSDAQ indices. 

Concerns over data security and government restrictions on AI technology have contributed to market volatility. 

While some tech stocks, such as AI-related firms, benefited from the shift in demand, overall investor sentiment remains cautious, influenced by external factors such as US tariffs and economic data. 

Uncertainty persists as investors closely monitor US economic indicators and global trade tensions, both of which continue to influence South Korea’s market dynamics. 

Many corporations and government agencies have restricted access, citing privacy vulnerabilities. 

The U.S. is investigating whether DeepSeek illegally used advanced AI semiconductors, with reports suggesting possible smuggling through Malaysia, Singapore, and the UAE. 

Several countries, including Italy, the UK, France, and Germany, are considering further restrictions due to national security risks. 

This issue has also impacted global markets.