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The rapid adoption of DeepSeek, a budget-friendly chatbot from a Chinese AI company, has triggered a significant reaction in the US stock market. The app's swift rise to the top of free downloads, overtaking competitors like Chat within a week of its public release, has sparked concern in Silicon Valley. Shares of major AI-related tech companies, including Nvidia, Microsoft, and Meta, saw substantial declines on Monday.
Stocks such as Nvidia (NVDA) and other Big Tech stocks tanked ahead of the market opening. Shares of AI leader Nvidia plummeted nearly 11%, leading to a decline in chip-related stocks. ASML saw a drop of almost 8%, while other tech giants like Broadcom and Micron Technology also experienced significant losses. Microsoft's stock fell more than 3% as concerns about the hefty investments in AI by large companies weighed on investor sentiment.
Other major players, including Google's parent Alphabet, Meta, and Amazon, also saw their shares slide as the tech sector faced a broad sell-off.
Yahoo Finance reported that the markets have been shaken by DeepSeek's assertion that its AI assistant outperforms leading models while using cheaper chips and less data. The app's rapid rise in popularity has prompted investors to reevaluate their confidence in AI-driven growth and its potential to continue boosting stock performance in the US.
DeepSeek is powered by the open-source DeepSeek-V3 model and the AI chatbot was reportedly created for less than $6 million (£7.5 million), a fraction of the billions spent by its rivals.
DeepSeek’s rapid emergence has coincided with the US restrictions for the sale of advanced chips, essential for AI development, to China.
In response, Chinese developers have embraced collaboration and shared technologies, leading to the creation of AI models that consume far less computing power and come at a significantly lower cost. This shift in approach could disrupt the AI industry and challenge the US's long standing dominance in the space as already witnessed with the emergence of DeepSeek.
DeepSeek was founded in 2023 by Liang Wenfeng, a 40-year-old information and electronic engineering graduate from Hangzhou, China.
