Amid the rising selling pressure in AI-driven companies, domestic companies including Anant Raj, Netweb Technologies India and Zen Technologies crashed as much as 20 per cent in Tuesday trading session. These stocks have corrected 40-50 per cent from their 52-weeks, thanks to the recent negative news flow and rising selling pressure in the broader markets.
These stocks have been feeling the rub-off the impact of fall in shares of Nvidia recently after the emergence of DeepSeek, a Chinese AI start-up. DeepSeek claims to be a free alternative to ChatGPT, establishing models at a lesser cost and with fewer chips.
The concerns over DeepSeek sent Nvidia's shares tumbling, leading to a $589 billion erosion in its market capitalization, the biggest single day erosion in any company's valuation in a single day. Netweb is a manufacturing partner for Nvidia, while Anant Raj is a leading data center player in India.
G Chokkalingam, Founder and Director at Equinomics Research said that the correction in such growth driven companies is not a surprise and this was on the expected lines as such counters are richly valued. The bottomline growth in such counters was a severe mismatch to their valuations. Even good companies need good valuations and may not be able to justify premium.
"If a company is commanding 50 times P/E valuations, the profit growth should be around 25-30 per cent to justify valuations. If a company fails to justify the valuations, they are punished hard in the market selloff," Chokkalingam added.
Shares of Anant Raj Ltd hit lower circuit of 20 per cent to Rs 534.45 on Tuesday, after falling 17 per cent in the previous trading session on Monday to Rs 668.05. The stock has wiped out more than one third of its value in the last two sessions, while it has tumbled 45 per cent from its 52-week highs.
Shares of Netweb Technologies India Ltd also cracked 10 per cent, locked in the lower circuit limit for the day to Rs 1,460.35 on Tuesday. The stock had settled Rs 1,622.60 on Monday, falling more than 11 per cent. The stock has crumbled more than 52 per cent from its 52-week high at Rs 3,060.
Zen Technologies Ltd also crashed more than 14 per cent to Rs 1,495.10 on Tuesday, compared to its previous close at Rs 1,743.35 on Monday. The stock dropped nearly 6 per cent in the previous session. It is down more than 43 per cent from its 52-week high at Rs 2,627.95.
Kranthi Bathini, Director of Equity Strategy at Wealthmills Securities, said futuristic business, whose cash flows may materialize in coming times, are taking a major beating in the current downtrend of the market. Anant Raj has been in momentum for the last few months and it is now taking the beating.
The world’s 500 richest people, led by Nvidia Corp. co-founder Jensen Huang, lost a staggering $108 billion on Monday as a tech-driven selloff shook global markets. The plunge was triggered by turbulence surrounding Chinese AI developer DeepSeek, sparking fears across the sector. Billionaires with fortunes tied to artificial intelligence were hit the hardest, bearing the brunt of the decline as major indices tumbled.
According to the Bloomberg Billionaires Index, Huang saw his fortune fall $20.1 billion, a 20 per cent drop, while Oracle Corp co-founder Larry Ellison’s $22.6 billion loss was larger in absolute terms, but represented just 12 per cent of his fortune. Dell's Michael Dell lost $13 billion.
More efficiency means more AI use leading to more demand for Nvidia technology, said Subho Moulik, Founder and CEO, Appreciate. "The other companies that took a battering in the markets – Broadcom and Micron Technology – can be an interesting buy on dip," he said.
Cloud servers like Amazon can also benefit. Amazon Web Service's robust infrastructure will enable businesses to create more sophisticated models closer to their customers. Although the short-term will be bumpy, the long-term runway appears stable, unless DeepSeek drops another Chinese New Year gift to the world later this year," Moulik added.