Investors worldwide are reevaluating their positions in major technology stocks, as the emergence of a low-cost Chinese artificial intelligence (AI) model, DeepSeek, challenges the dominance of established Western companies in the sector.
On Monday, shares in leading AI players such as Nvidia and Oracle plummeted, with Nvidia dropping 10% and Oracle falling 8%. Palantir, an AI data analytics company, saw a 7% decline in pre-market trading. Futures on the Nasdaq 100 slid almost 4%, indicating a potentially significant downturn.
DeepSeek, a Chinese startup, unveiled its free AI assistant last week, claiming it operates using less data at a fraction of the cost compared to incumbent models. The assistant quickly gained traction, overtaking U.S. rival ChatGPT in downloads on the Apple Store. This development has raised concerns about the sustainability of the high levels of investment by Western companies like Apple and Microsoft in AI technologies.
From Tokyo to Amsterdam, shares in AI-focused companies tumbled as investors grappled with the potential implications of DeepSeek's breakthrough. \"If there truly has been a breakthrough in the cost to train models from over $100 million to an alleged $6 million, this is very positive for productivity and AI end users,\" said Jon Withaar, a senior portfolio manager at Pictet Asset Management.
The AI sector has seen massive inflows of capital over the past 18 months, driving up company valuations and pushing stock markets to record highs. Nvidia's stock, for example, has risen over 200% during this period. However, DeepSeek's advancement prompts questions about whether such high levels of spending are necessary.
Marc Andreessen, a prominent Silicon Valley venture capitalist, described DeepSeek's R1 model as AI's \"Sputnik moment\" on social media, referencing the historic launch that ignited the space race. \"DeepSeek R1 is one of the most amazing and impressive breakthroughs I've ever seen — and as open source, a profound gift to the world,\" he stated.
In Europe, shares of companies like ASML, which counts TSMC from the Taiwan region, Intel, and Samsung as its customers, dropped significantly. ASML fell almost 11%, while in Japan, SoftBank Group slid more than 8% after announcing a $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.
\"Market participants are reevaluating the capital expenditures of major tech companies,\" noted Nick Ferres, chief investment officer at Vantage Point Asset Management. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, added, \"The idea that cutting-edge technologies in America are the most superior globally may start to change.\"
As DeepSeek's impact unfolds, the global AI landscape may witness a shift, with more accessible and cost-effective solutions emerging from Asia. This development could democratize AI technology, benefiting end users worldwide while challenging existing market leaders.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
