US Tech Stocks Drop after Chinese AI Startup DeepSeek Reveals Low-Cost Model
US stocks saw a sharp drop on Monday, with chipmaker Nvidia losing nearly $600 billion in market value, after a Chinese AI startup, DeepSeek, introduced a new AI model that rivals US companies like OpenAI, Google, and Meta. DeepSeek’s model, R1, works similarly to ChatGPT but costs far less to operate, using just $5.6 million in computing power compared to the hundreds of millions US companies spend. This announcement shocked the market, causing the tech-heavy Nasdaq to fall 3.1% and the S&P 500 to drop 1.5%. Nvidia, the leading AI chip supplier, saw its stock price fall 17%, losing the most market value ever recorded in a single day. Other tech companies like Meta, Google’s parent Alphabet, and Nvidia competitors also dropped sharply. DeepSeek’s success with lower-cost AI has raised concerns among investors about whether US companies are overspending on AI development without guaranteed profits. The news also led to a shift in investments away from energy companies that supply power to AI data centers, as those stocks tumbled too. Despite the panic, some experts believe the impact of DeepSeek’s achievement may be overstated, and it will take time to see if the Chinese startup can truly challenge the US’s AI leadership.
