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Nvidia, the prominent US chip-maker, led a significant downturn in tech stocks on Monday after reports surfaced about a low-cost generative AI model from China, raising concerns about its impact on American dominance in the AI industry.
The AI chatbot, developed by DeepSeek, a startup based in Hangzhou, China, has reportedly matched the capabilities of leading US AI models at a fraction of the investment cost. DeepSeek claimed to have spent just $5.6 million on its model, a stark contrast to the billions invested by US tech giants.
Nvidia’s stock dropped nearly 17% on Wall Street, wiping out approximately $600 billion in market value. The Nasdaq index, heavily populated with tech firms, also fell by more than 3%.
Kathleen Brooks, research director at XTB, noted that “US tech dominance is being challenged by China,” emphasizing concerns about whether China could surpass the US in developing more efficient, cost-effective AI solutions. Meanwhile, Art Hogan, chief market strategist at B. Riley Wealth, described the market’s reaction as hasty, with skepticism about the credibility of DeepSeek’s claims still lingering.
Adding to the drama, DeepSeek faced “large-scale malicious” cyberattacks on its services, prompting the startup to restrict new user registrations. The chatbot had already climbed to the top of Apple’s US App Store’s free application rankings.
Shares of other US tech players, including Broadcom, dropped 17.4%, while Dutch semiconductor equipment manufacturer ASML saw a 6.7% decline. Constellation Energy, which focuses on building energy capacity for AI, experienced a 20% plunge.
In Asia, Japan’s SoftBank, involved in a $500 billion US-led AI infrastructure project, saw its shares tumble over 8%. Japanese semiconductor companies Advantest and Tokyo Electron also suffered declines of 8% and 5%, respectively.
Meanwhile, global markets were mixed. London’s FTSE 100 index ended flat, while Frankfurt’s DAX and Paris’ CAC 40 fell 0.5% and 0.3%, respectively. In the US, the S&P 500 dropped 1.5%, and the Nasdaq fell 3.1%. The Dow Jones Industrial Average, however, managed a 0.7% gain.
The tech sector downturn comes as interest-rate decisions loom from the US Federal Reserve and European Central Bank. Inflation data in the US is also due this week, potentially influencing market dynamics.
Geopolitical tensions added to market uncertainty, with US President Donald Trump threatening tariffs on Colombian goods after the country temporarily blocked deportation flights. Colombia initially retaliated but later agreed to accept deportees, resolving the dispute.
Global oil prices also dipped, with Brent crude down 1.8% to $77.08 per barrel and West Texas Intermediate falling 2% to $73.17.
Key currency movements showed slight shifts, with the euro dropping to $1.0492 and the dollar weakening to 154.61 yen. The pound saw a modest rise to $1.2496 against the dollar.
