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Tech stocks fell on Monday morning as fears grew about Chinese artificial intelligence firm DeepSeek. US dominance in AI development leapfrogged,
The Nasdaq Composite, which tracks the nation’s biggest tech companies, fell more than 3%. The Dow fell less than a point and the S&P 500 fell nearly 2%.
The selloff was prompted by advances claimed by China’s DeepSeek, which released an open-source artificial intelligence model in December after saying it took just two months and less than $6 million to build. These claims would pale in comparison to the hundreds of billions of dollars that US tech giants like OpenAI, Microsoft, Meta and others have poured into developing their own models, raising fears that China could overtake the US in scale and efficiency. Could. AI investment.
DeepSeek’s app is now the top free app in the Apple App Store, pushing OpenAI’s ChatGPT to second place.
The biggest loser due to the stock market decline was chip maker Nvidia, whose shares fell by 18%. Nvidia has been one of the better performers recently, with shares rising more than 200% over the past two years, making it one of the biggest companies in the world. Nvidia’s collapse would wipe out more than $500 billion from the company’s market value. If its shares close at these levels, it would be the largest market price decline in the history of the US stock market. According To Bloomberg.
Other semiconductor companies also suffered big losses. Micron Technology and Arm Holdings fell 7% each, while ASML declined 9%.
Mega-cap tech firms also felt the pain, with Microsoft and Google’s parent company Alphabet falling 4% each. Meta Platform, which is developing its own open-source AI models, fell about 2%.
There are concerns about DeepSeq’s reported progress despite export controls on the sale of advanced semiconductors to China.
Speaking at the World Economic Forum last week, Microsoft CEO Satya Nadella said DeepSeek’s progress appears to be “super impressive… and super-computer efficient.” “We must take developments in China very seriously,” Nadella said.
In late 2024, Microsoft said it planned to invest $35 billion to build “trusted and secure AI and cloud datacenter infrastructure.”
Constellation Energy, which struck a deal with Microsoft to refurbish the Three Mile Island nuclear plant to power artificial intelligence servers, sank 16%. Shares of other power companies seen as AI beneficiaries such as Vistra Energy and NRG Energy also fell sharply. Siemens Energy, which makes equipment for utility companies, fell 20%. GE Vernova, another power tool maker, fell more than 23%.
Not everyone is convinced by DeepSeek’s announcements. “We believe…DeepSeek ‘did not build OpenAI for $5M'”, Bernstein analyst Stacey Rusgon wrote In a note to clients on Monday. “The models look fantastic but we don’t think they’re miracles.”
Giuseppe Sette, president of AI market research firm Reflexivity, said the underlying technology for DeepSeek appears to be “extremely optimistic in the long term” as it could be a playbook for other AI firms moving forward.
“DeepSeek has taken the market by storm by doing more with less. In layman’s terms, they activate only the most relevant parts of their model for each query, and this saves money and compute power. “This suggests there will be surprises with AI over the next few years,” Sete wrote in a note on Monday.
