Fears of China’s AI dominance surged as DeepSeek’s groundbreaking advancements sent U.S. tech stocks into freefall. Nasdaq tumbled 3.4%, Nvidia fell over 12%, and Microsoft’s shares slid 4%.
Introduction
Tech stocks faced a sharp decline on Monday as concerns grew over China’s artificial intelligence firm, DeepSeek, potentially surpassing U.S. dominance in AI development. The Nasdaq Composite dropped 3.4% at the opening bell, while the Dow and S&P 500 saw declines of 180 points and 2%, respectively.
DeepSeek’s Impact on the Market
DeepSeek’s rapid AI model development, completed in just two months for under $6 million, has raised questions about the efficiency of U.S. investments. In comparison, American tech giants like OpenAI, Microsoft, and Meta have spent hundreds of billions on their AI systems.
- DeepSeek’s AI app recently overtook OpenAI’s ChatGPT as the top free app on the Apple App Store, fueling further concerns.
Stock Market Reactions
- Semiconductor Companies:
- Nvidia shares fell by over 12%, wiping $300 billion in market value.
- Micron Technology, Arm Holdings, and ASML saw declines of 7%, 7%, and 9%, respectively.
- Mega-Cap Tech Firms:
- Microsoft and Alphabet lost 4%, while Meta fell 2%.
- Energy Companies:
- Constellation Energy dropped 16% after its AI-related nuclear plant deal with Microsoft.
- Vistra Energy and NRG Energy saw significant declines, with Siemens Energy falling 20% and GE Vernova plunging 23%.
Market Analysts Respond
- Some analysts question the credibility of DeepSeek’s claims, with Bernstein’s Stacy Rasgon doubting the feasibility of their cost and timeline.
- However, Giuseppe Sette of Reflexivity called DeepSeek’s model “bullish for the long-term,” highlighting its efficiency in reducing computational costs by activating only relevant parts of the model for queries.
Conclusion
While skepticism remains, DeepSeek’s advancements underline the disruptive potential of AI. With the global AI race intensifying, surprises and innovations are likely to keep coming.
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