Chinese artificial intelligence startup DeepSeek has sparked a major shakeup in global technology markets, questioning America’s AI leadership. The firm’s new AI model, praised for its efficiency and cost-effectiveness on less-advanced chips, sent shockwaves through Wall Street and beyond.
Shares of Nvidia, a cornerstone of the AI boom, tumbled over 10% in premarket trading on Monday, potentially marking one of the largest market value losses for a single company if the trend holds. Nasdaq 100 futures plunged 5.2%, their sharpest intraday drop since August, while S&P 500 futures fell 2.4%.
The fallout extended to European markets, where ASML Holding NV, a key chip equipment supplier, saw its shares plummet 12%. The Nasdaq 100 and Europe’s Stoxx 600 tech sub-index could lose a combined $1.2 trillion in market capitalization. Meanwhile, the VIX, a volatility gauge, spiked higher.
DeepSeek’s breakthrough challenges the high-cost strategies dominating the AI supply chain, prompting a reassessment of investments. “This could derail the AI investment case,” noted Vey-Sern Ling, managing director at Union Bancaire Privée.
DeepSeek’s app has topped Apple’s App Store rankings, lauded for its transparency and effectiveness. While global AI stocks stumbled, Chinese AI stocks rallied, with Merit Interactive Co. surging to daily limits.
As tech giants Apple and Microsoft prepare to report earnings this week, DeepSeek’s rise underscores growing competition in AI. “It’s a reminder that AI dominance isn’t guaranteed,” said Charu Chanana of Saxo Markets.