Global tech stocks took a significant hit on Monday as investors reacted to the emergence of DeepSeek, a Chinese AI startup that unveiled a low-cost artificial intelligence model last week.
DeepSeek's new AI assistant, which the company claims operates with less data and at a fraction of the cost of existing models, has sent ripples through the technology sector. The assistant quickly surpassed U.S. competitor ChatGPT in downloads on the Apple Store, signaling a potential shift in the AI landscape.
The announcement prompted a sell-off in major Western technology stocks. Futures on the Nasdaq 100 dropped nearly four percent, indicating a possible major downturn when markets open. Shares of AI chipmaker Nvidia fell 10 percent, Oracle declined eight percent, and AI analytics firm Palantir lost seven percent in pre-market trading.
\"We still don't know the details and nothing has been 100 percent confirmed regarding the claims,\" said Jon Withaar, a senior portfolio manager at Pictet Asset Management. \"But if there truly has been a breakthrough in the cost to train models from over $100 million to about $6 million, this is very positive for productivity and AI end users.\"
The impact was felt globally, with AI-related shares tumbling from Tokyo to Amsterdam. The upheaval reflects investors' concerns about the sustainability of high levels of spending and investment in AI by major Western companies.
'Sputnik Moment' for AI
Silicon Valley venture capitalist Marc Andreessen described DeepSeek's R1 model as AI's \"Sputnik moment,\" referencing the 1957 launch of the Soviet satellite that spurred 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,\" Andreessen said on social media platform X.
Big Tech companies have been investing heavily in AI development, driving stock valuations to record highs. Nvidia's stock has surged over 200 percent in the past 18 months, fueled by optimism about AI's potential returns.
However, the debut of DeepSeek's cost-effective model has raised questions about these investments. \"The market is questioning the capital expenditure spending of the major tech companies,\" noted Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore.
Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, added, \"The idea that the most cutting-edge technologies in America are the most superior globally—there's concern that this perspective might start to change.\"
DeepSeek's breakthrough may signal a new era in AI development, where accessibility and cost-effectiveness become key competitive factors. As the industry adjusts to this potential paradigm shift, investors and market analysts will be closely watching how established tech giants respond.
Read more: DeepSeek tops iPhone App Store charts: What does it mean?
Reference(s):
DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
cgtn.com
