ar
US tech stocks experienced a significant sell-off on Monday, primarily triggered by developments from the Chinese artificial intelligence startup DeepSeek, essentially a rival to OpenAI’s ChatGPT.
The company announced the creation of an advanced AI model at a development cost of under $6 million, notably achieved without reliance on high-end foreign processors that are subject to U.S. export restrictions. This announcement raised concerns about the competitive edge of U.S. tech firms in the AI sector. ⁽¹⁾
The sell-off mostly impacted semiconductor stocks, especially Nvidia, a leading supplier of AI chips, whose stock price declined by 17%, erasing approximately $465 billion from its market cap—the largest single-day loss for a company in U.S. stock market history. Other major tech stocks, including Microsoft, Meta Platforms, and Alphabet, also faced substantial declines. ⁽²⁾
Source: TradingView
The chart above shows the price of the Nasdaq 100 index. The sell-off started in Monday’s early Asian session and continued throughout the day.
Investors were concerned that DeepSeek’s innovations would reduce the need for AI infrastructure from well-known American tech companies. These worries were heightened by the startup’s ability to create a competitive AI model at a fraction of the price paid by billion-dollar U.S. companies like OpenAI and Meta Platforms. ⁽³⁾
OpenAI CEO Sam Altman praised the Chinese startup DeepSeek’s R1 AI model as “impressive,” highlighting its ability to deliver results at a fraction of the cost.
However, he reaffirmed OpenAI’s commitment to leveraging greater computing power, which he views as essential for achieving their mission. DeepSeek gained attention for its V3 model, reportedly trained with under $6 million in computing resources using Nvidia’s less powerful H800 chips. ⁽⁴⁾
The newly launched DeepSeek-R1 is 20 to 50 times more cost-effective than OpenAI’s o1 model, depending on the task, as per a post on DeepSeek’s WeChat account. While Altman expressed excitement for OpenAI’s roadmap, DeepSeek’s advancements have sparked debates about the high levels of AI investment among U.S. tech firms. ⁽⁵⁾
While the overwhelming success of yet another Chinese app raised new concerns for the new US administration and legislative leaders, President Donald Trump stated on Monday that the abrupt emergence of the Chinese AI software DeepSeek “should be a wake-up call” for American tech companies. ⁽⁶⁾
Trump acknowledged the threat presented by DeepSeek, which soared to the top of the Apple app store over the weekend. However, he stated that he still anticipated American tech companies to dominate artificial intelligence. ⁽⁷⁾
Some analysts believe fears might be exaggerated, regardless of the market’s response. They claim that continued large expenditures in AI infrastructure by businesses like Meta Platforms and Stargate demonstrate the continued strength in the market for AI chips. ⁽⁸⁾
The precision and flexibility of DeepSeek’s inventions will likely determine the actual effect of their claims on the supply chain for AI technologies.
