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Nvidia, a leader in US chip production, spearheaded a sharp decline in tech stocks on Monday after reports surfaced of a budget-friendly Chinese generative AI model. The development has raised fears that the new competitor could undermine America’s stronghold in the booming artificial intelligence market.
DeepSeek, a startup headquartered in Hangzhou, China, has unveiled a chatbot that reportedly rivals the capabilities of leading US AI developers. Remarkably, this achievement comes at a fraction of the investment typically poured into such technologies by American tech giants, raising concerns about emerging competition in the AI landscape.
Nvidia, the semiconductor giant fueling much of the AI industry, saw its shares plunge by over 15 percent during midday trading on Wall Street. The sharp decline wiped out more than $500 billion from the company’s market valuation, sending shockwaves across the tech sector.
The Nasdaq index, heavily weighted with tech stocks, dropped over three percent, reflecting widespread market turbulence. AI powerhouses Microsoft and Google’s parent company, Alphabet, saw notable losses, while Meta defied the trend by maintaining gains and trading in positive territory.
DeepSeek, whose chatbot became the top-rated free application on Apple’s US App Store, said it spent only $5.6 million developing its model — peanuts when compared with the billions US tech giants have poured into AI.
US “tech dominance is being challenged by China,” said Kathleen Brooks, research director at trading platform XTB.
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“The focus is now on whether China can do it better, quicker and more cost effectively than the US, and if they could win the AI race,” she said.
US venture capitalist Marc Andreessen has described DeepSeek’s emergence as a “Sputnik moment” — when the Soviet Union shocked Washington with its 1957 launch of a satellite into orbit.
As DeepSeek rattled markets, the startup on Monday said it was limiting the registration of new users due to “large-scale malicious attacks” on its services.
Meta and Microsoft are among the tech giants scheduled to report earnings later this week, offering opportunity for comment on the emergence of the Chinese company.
