Global investors dumped tech stocks on Monday as they worried that the emergence of a low-cost Chinese artificial intelligence model would threaten the dominance of AI leaders like Nvidia, evaporating US$593 billion of the chipmaker’s market value, Reuters reported.
Last week, Chinese startup DeepSeek launched a free AI assistant that uses less data at a fraction of the cost of incumbent services. By Monday, the assistant had overtaken U.S. rival ChatGPT in downloads.
This led the tech-heavy Nasdaq to fall 3.1 percent on Monday. Nvidia was the Nasdaq’s biggest drag, with its shares tumbling just under 17 percent.
The Nasdaq’s next-biggest drag was chipmaker Broadcom Inc, which finished down 17.4 percent, followed by ChatGPT backer Microsoft which fell 2.1 percent and then Google parent Alphabet which ended down 4.2 percent.
The Philadelphia semiconductor index (.SOX) tumbled 9.2 percent.
U.S. equity declines followed a selloff that started in Asia, with Japan’s SoftBank Group finishing down 8.3 percent.
On January 22, 2025, U.S. AI-related stocks had rallied sharply after President Donald Trump announced a private-sector plan for what he said would be a US$500 billion investment in AI infrastructure through a joint venture known as Stargate.
Since then, SoftBank announced a US$19 billion commitment to help fund the Stargate venture whose other backers include ChatGPT developer OpenAI and Oracle , whose shares finished down 13.8 percent on Monday.
Trump on Monday said that DeepSeek should be a “wakeup call” and could be a positive development.
Little is known about the Hangzhou startup behind DeepSeek, whose controlling shareholder is Liang Wenfeng, co-founder of quantitative hedge fund High-Flyer.
DeepSeek-R1, released last week, is 20 to 50 times cheaper to use than OpenAI’s o1 model, depending on the task, according to a post on DeepSeek’s official WeChat account.