A Chinese artificial intelligence startup, DeepSeek, has stirred global technology markets by unveiling a breakthrough AI model that operates efficiently on less advanced hardware. This announcement has raised concerns about the valuation and competitive edge of American tech giants like Nvidia Corp., which have dominated the AI boom.
DeepSeek, founded by Liang Wenfeng, gained attention after its new AI model demonstrated cost-effective capabilities while running on commonly available chips. The development challenges the prevailing assumption that cutting-edge AI requires high-cost infrastructure, an argument that has propelled the valuation of U.S.-based chipmakers and AI leaders.
“DeepSeek shows it’s possible to develop high-performance AI without relying on the most expensive hardware,” noted Vey-Sern Ling, a senior market analyst. “This could reshape the investment thesis for the entire AI supply chain.”
Following the news, Nasdaq 100 futures fell by as much as 2.3%, and the S&P 500 dipped 1.2%, adding to losses from the prior week. Meanwhile, Chinese technology stocks rallied, with the Hang Seng Tech Index rising 2% in Monday trading.
DeepSeek’s model has also gained praise for its transparency, with its AI app topping Apple’s App Store charts. Its ability to show the reasoning behind its outputs has been lauded by investors and users alike, distinguishing it from some U.S.-based competitors.
While Chinese stocks such as Merit Interactive surged, global markets felt the impact of DeepSeek’s emergence. Nvidia, a key player in the AI sector, saw its shares drop over 3% in early trading, with related suppliers like Tokyo-listed Advantest Corp. falling 8.6%. Investors are reconsidering the energy and computing power required to sustain the sector’s growth.
The timing of this disruption coincides with a major week for tech earnings, as companies like Apple and Microsoft report their results. Analysts have flagged slowing profit growth and high valuations as points of vulnerability for the AI-driven rally.
The rise of DeepSeek also questions the U.S.’s dominance in AI innovation. While Washington’s trade restrictions have limited China’s access to advanced chips, DeepSeek’s use of accessible, open-source technology suggests a narrowing of the technological gap.
“AI dominance is not guaranteed,” said Charu Chanana, chief strategist at Saxo Markets. “DeepSeek highlights the intensifying competition in the space. Though it’s early, this could mark the beginning of a faster, more competitive landscape.”
