Nvidia, the
leading U.S. chipmaker, experienced a sharp decline in its stock price on
Monday following the emergence of a new Chinese AI model that could challenge
America's leadership in artificial intelligence. The chatbot, developed by
DeepSeek, a startup based in Hangzhou, China, is reportedly as powerful as top
U.S. AI models but was created at a fraction of the cost.
As Nvidia’s
chips play a crucial role in AI development, the company saw its stock drop
nearly 17%, wiping out approximately $600 billion in market value. The Nasdaq,
which tracks major tech stocks, also fell more than 3%. DeepSeek’s chatbot,
which quickly became the top free app on Apple’s U.S. App Store, was developed
with an investment of just $5.6 million—significantly lower than the billions
spent by American AI firms.
Kathleen
Brooks, research director at trading platform XTB, highlighted that China's
advancements in AI are posing a significant challenge to U.S. tech
dominance." She emphasized that the key concern now is whether China can
build AI models more efficiently and affordably than the U.S., potentially
overtaking the industry.
Art Hogan,
chief market strategist at B. Riley Wealth, characterized the market's response
as a knee-jerk reaction, stating that many investors remain doubtful about
DeepSeek’s claims. "People are trying to determine whether this can be
trusted and what its implications are," he remarked.
As
DeepSeek’s rise rattled markets, the Chinese startup announced on Monday that
it was temporarily limiting new user registrations due to "large-scale
malicious" cyberattacks targeting its services. Meanwhile, major U.S. tech
companies, including Meta and Microsoft, are set to release their earnings this
week, providing an opportunity to address the impact of DeepSeek’s emergence.
Market
Impact
- Broadcom,
another major U.S. chipmaker, saw its stock plummet by 17.4%.
- Dutch
semiconductor equipment manufacturer ASML lost 6.7% in stock value.
- Constellation
Energy, which plans to expand energy capacity for AI, saw its shares fall by
more than 20%.
- The S&P
500, a key U.S. stock index, dropped 1.5%, while the Dow Jones managed a slight
0.7% gain.
- In Europe,
stock markets in Frankfurt and Paris closed lower, while London remained
stable.
Just a week
into his presidency, Donald Trump unveiled a $500 billion initiative aimed at
strengthening U.S. AI infrastructure. The project, led by Japanese tech giant
SoftBank and OpenAI, the creators of ChatGPT, is meant to reinforce America's
position in the AI race. However, following the announcement, SoftBank's stock
dropped over 8% in Tokyo, while Japanese semiconductor firms Advantest and
Tokyo Electron also saw significant losses.
What is
DeepSeek AI?
DeepSeek is
an AI platform specializing in natural language processing, data analysis, and
machine learning. Its models, such as DeepSeek-V3 and DeepSeek-R1, are designed
to be both cost-effective and highly capable, delivering complex tasks with
remarkable accuracy.
The
excitement around DeepSeek gained momentum after the launch of OpenAI’s ChatGPT
in late 2022, which triggered intense competition among Chinese tech firms to
develop their own AI chatbots. While Baidu, China’s search engine giant,
introduced its version of ChatGPT, it failed to meet expectations, leaving many
in China disappointed with the performance gap between Chinese and U.S. AI
models. DeepSeek, however, has drawn significant attention for offering a
powerful and more affordable alternative, signaling a new era of competition in
the global AI industry.
