“DeepSeek’s cost-effective AI model rattles global tech stocks, raising questions about U.S. dominance in artificial intelligence innovation.”
January 28, 2025: New York, United States:
U.S. chipmaker Nvidia led a historic rout in technology stocks on Monday as the rise of a low-cost Chinese AI model, DeepSeek, shook investor confidence in American dominance in artificial intelligence (AI).
Also Read: Trump Labels China’s DeepSeek AI a ‘Wake-Up Call’ for US Tech Sector
DeepSeek, a startup based in Hangzhou, China, unveiled a generative AI model that has reportedly matched U.S. AI leaders in performance, at a fraction of their development costs. The announcement sparked panic across global markets, with Nvidia shares plunging nearly 17%, wiping out approximately $600 billion in market value—the largest single-day loss for the company in history.
Also Read: DeepSeek: The Chinese AI Model Disrupting the Global AI Landscape
The Nasdaq index fell 3.1%, while other major players, including Broadcom and ASML, also faced steep declines. Constellation Energy, tied to AI infrastructure development, tumbled over 20%.
The Rise of DeepSeek
DeepSeek’s AI assistant has surged in popularity, becoming the top-rated free app on Apple’s U.S. App Store. According to the company, it developed its model with just $5.6 million—an insignificant sum compared to the billions spent by U.S. tech giants like OpenAI and Microsoft.
“The emergence of DeepSeek AI should be a wake-up call for U.S. industries,” said President Donald Trump during a Republican retreat in Miami. He acknowledged the challenge posed by China while emphasizing the need for innovation in the U.S. tech sector.
Impact on Global Markets
The ripple effects were not limited to the U.S. In Europe, Frankfurt and Paris stock exchanges closed lower, while Asian markets mostly declined. Japanese semiconductor companies also faced losses, with SoftBank tumbling over 8% in Tokyo.
The disruption has raised questions about whether the U.S. can maintain its edge in AI innovation, especially as China demonstrates its ability to develop competitive technology under significant trade restrictions.
Economic and Geopolitical Repercussions
This development comes as global markets brace for interest rate decisions from the U.S. Federal Reserve and the European Central Bank later this week. Additionally, escalating trade tensions, including President Trump’s tariff threats against Colombia, have further fueled market instability.
While skepticism about DeepSeek’s claims persists, its emergence has forced U.S. firms to reconsider their investment strategies in AI, potentially reshaping the competitive landscape of the technology industry.
Tags:
- Nvidia stock crash
- China AI breakthrough
- DeepSeek vs OpenAI
- U.S.-China AI competition
- Global tech market disruption
- Nvidia market value decline
- AI industry trends