The emergence of China-based AI app DeepSeek sent shares plummeting on Monday for many U.S. tech giants, including chipmaker Nvidia and AI-backer Microsoft.
Nvidia, which helped catapult market wide gains in recent years, saw its share price plummet by more than 12% in early trading on Monday. Shares of Microsoft, a major stakeholder in ChatGPT-maker OpenAI, fell about 4.5%.
The tech-heavy Nasdaq fell more than 3% in early trading on Monday. The Dow Jones Industrial Average and S&P 500 also inched downward.
The DeepSeek chatbot — which responds to user queries, just like its U.S.-based counterparts — stands atop the Apple app-store charts. Early testing suggests that the quality of DeepSeek rivals that of U.S.-based AI products.
Developers of the system powering the AI, called DeepSeek-V3, published a research paper indicating that the technology relies on much fewer specialized computer chips than its U.S. competitors.
DeepSeek has emerged despite export controls issued by the Biden administration that prohibit U.S. manufacturers from selling such specialized chips to firms in China.
Ivan Feinseth, a market analyst at Tigress Financial, described DeepSeek as “the first shot at what is emerging as a global AI space race.”
“The potential power and low-cost development of DeepSeek is calling into question the hundreds of billions of dollars committed in the U.S,” Feinseth said in a note to clients on Monday.
Alphabet, the company behind AI chatbot Gemini, saw shares drop about 3% on Monday. The stock price of Amazon, which offers its own AI-fueled shopping assistant, also fell about 3%.
The dip interrupts a yearslong surge for many tech giants, driven in part by enthusiasm about the future of AI. The tech-heavy Nasdaq climbed more than 30% in 2024, sustaining much of its sky-high 43% growth over the year prior. Many analysts expected those robust gains to continue this year.
“When expectations are high, one skeptical headline can knock the market off its axis. That’s exactly what we’re seeing today,” Callie Cox, chief market strategist at Ritholtz Wealth Management, said in a statement on Monday.
Source: abcNEWS
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