The tech world faced a seismic shift on Monday night as Chinese artificial intelligence firm DeepSeek emerged with a low-cost AI model, threatening to upend the dominance of established US giants. The news triggered a dramatic sell-off in tech stocks, leaving industry leaders scrambling to assess the impact of this unexpected competitor.
Nvidia Suffers Record Loss
The biggest casualty of the market upheaval was chipmaker Nvidia, which saw its share price plummet nearly 17%. This marked the largest single-day loss in market value on Wall Street, wiping out approximately $589 billion. The S&P 500 fell by 1.5%, with Nvidia’s collapse dragging down the index. Other tech heavyweights, including Microsoft, Meta, and Alphabet, also faced sharp declines as investor confidence faltered.
DeepSeek: A New Era of AI
DeepSeek’s AI model has quickly become a sensation, with its app topping download charts in the US just a week after launch. The company claims its large language AI model was developed at a fraction of the cost of rivals, such as OpenAI, by forgoing Nvidia’s expensive chips. This cost efficiency has raised concerns about the sustainability of the current AI market structure and the ability of US firms to maintain their dominance.
Global Ripple Effects
The disruption wasn’t confined to US markets. Dutch chipmaker ASML saw a 7% drop in its stock, while Japan’s Softbank fell by 8.3%. Despite the global tech slump, the FTSE 100 in the UK showed resilience, edging up 0.21% in early Tuesday trading. Analysts suggest that DeepSeek’s breakthrough underscores the rapid pace of innovation in China, even as US export controls on Nvidia’s most powerful chips remain in place.
Trump’s Response
President Donald Trump described DeepSeek’s emergence as a “wake-up call” for US tech firms, framing the disruption as a potential opportunity. “If you could do it cheaper, if you could do it (for) less (and) get to the same end result, I think that’s a good thing for us,” he told reporters aboard Air Force One. However, he also hinted at “much bigger” trade tariffs, potentially targeting foreign-produced semiconductors, pharmaceuticals, and metals to safeguard US interests.
Cybersecurity Concerns
DeepSeek reported being the target of a cyberattack on Monday, which disrupted new user registrations. Despite the attack, existing users were able to access the platform without issues. The company characterized the incident as “large-scale malicious attacks” but has not indicated any long-term effects on its services.
Industry Insights
Kathleen Brooks, research director at XTB, highlighted the broader implications of DeepSeek’s emergence. “How does Trump react to a threat against US AI dominance? He threatens wide-ranging tariffs on foreign-produced semiconductors, pharma, and metals,” she said. Brooks also noted that Nvidia’s losses might have been overblown, with early European trading hinting at a potential recovery.
A Turning Point for AI
DeepSeek’s rise signals a new chapter in the AI race, challenging the notion that market dominance requires astronomical investments. For US tech giants, the emergence of this Chinese competitor is a stark reminder of the need to innovate and adapt in an increasingly globalized and cost-conscious marketplace. Whether this disruption will lead to long-term shifts or short-term volatility remains to be seen, but one thing is clear: the AI landscape has been irrevocably altered.
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