Beijing, China — Global technology stocks faced a significant downturn on Monday as investors reacted to the emergence of DeepSeek, a Chinese startup that unveiled a cutting-edge artificial intelligence assistant. The new AI model promises to operate using less data at a fraction of the cost compared to existing models from established Western companies.
The launch of DeepSeek's free assistant last week has cast doubts on the dominance of major Western tech firms in the AI sector. Investors responded by offloading shares in prominent technology companies, leading to notable declines in their stock prices. Futures on the Nasdaq 100 dropped almost four percent, indicating the potential for the index's biggest daily slide since September 2022. The S&P 500 futures also fell by two percent.
Shares in AI chipmaker Nvidia plummeted by 10 percent, while Oracle saw an eight percent decrease. AI data analytics firm Palantir experienced a seven percent drop in pre-market trading. The ripple effect was felt across global markets, with AI-related stocks tumbling from Tokyo to Amsterdam.
DeepSeek's assistant has quickly gained popularity, surpassing U.S. rival ChatGPT in downloads on the Apple Store by Monday. The assistant offers a viable, cost-effective AI alternative, raising questions about the sustainability of high levels of spending and investment in AI by Western companies such as Apple and Microsoft.
Market analysts are viewing DeepSeek's innovation as a potential turning point in AI investment dynamics. \"If there truly has been a breakthrough in the cost to train models from over $100 million to around $6 million, this is very positive for productivity and AI end-users,\" said Jon Withaar, a senior portfolio manager at Pictet Asset Management. \"The cost is obviously much lower, meaning lower cost of access.\"
Silicon Valley venture capitalist Marc Andreessen described DeepSeek's R1 model as AI's \"Sputnik moment,\" referencing the Soviet Union's 1957 satellite launch that marked the beginning of 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 on social media.
However, some market strategists urge caution. Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, noted, \"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. I think it might be a bit premature.\"
The development signifies a shift in the global AI landscape, highlighting China's growing influence in technology innovation. The impact on major tech companies emphasizes the need for adaptability in a rapidly evolving market where new players can significantly disrupt established norms.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
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