US chipmaker Nvidia faced a significant setback on Monday as tech stocks took a nosedive following the emergence of a low-cost Chinese AI model that could shake up the industry.
DeepSeek, a startup based in Hangzhou, China, has developed a generative AI chatbot that rivals the performance of US-developed models—yet at a fraction of the cost. The innovation has sparked conversations about a potential shift in the AI landscape, with American dominance now under scrutiny.
Nvidia, a key player in the AI ecosystem, saw its shares drop nearly 17% on Wall Street, wiping out around $600 billion in market value. The broader tech-heavy Nasdaq index also declined over 3%, reflecting the shockwaves across the industry.
DeepSeek’s chatbot, which quickly became the top-rated free app on Apple’s US App Store, reportedly required just $5.6 million to develop—a stark contrast to the billions invested by US companies. This development has fueled concerns about whether China could outpace the US in terms of cost-efficiency and innovation in AI.
Market analyst Kathleen Brooks noted that China’s advancements are raising serious questions about the future of tech leadership. “The focus now is whether China can deliver faster and more cost-effectively than the US,” she said.
Meanwhile, B. Riley Wealth strategist Art Hogan described the market’s reaction as hasty but reflective of growing uncertainty. “Investors are trying to determine if these claims are credible and what the broader implications might be,” he explained.
DeepSeek also revealed on Monday that it was limiting new user registrations due to large-scale cyberattacks on its services. The company has yet to provide details on the nature or source of these attacks.
In related developments, US tech giants Meta and Microsoft are set to report their earnings this week, likely addressing the growing concerns sparked by DeepSeek’s entry into the market.
Other semiconductor firms also felt the heat, with Broadcom shares falling 17.4%, and Dutch equipment manufacturer ASML seeing a 6.7% drop. Energy company Constellation Energy, which plans to expand its capacity for AI-related operations, faced a steep 20% decline.
The market turbulence wasn’t confined to the US. European stock markets closed mostly in the red, with Frankfurt and Paris recording losses, while London remained flat. Asian markets also saw declines, adding to the global unease.
Beyond tech, geopolitical tensions added another layer of uncertainty. Former US President Donald Trump announced a $500 billion initiative for AI infrastructure last week, but his recent trade threats against Colombia have stirred concerns about stability. Colombia’s initial retaliatory tariffs were later retracted after diplomatic negotiations, but the situation remains tense.
As the week unfolds, all eyes will be on upcoming interest rate decisions from the US Federal Reserve and the European Central Bank, alongside inflation data and tech earnings reports, to gauge the direction of global markets.