US technology giant Nvidia has seen its stock value plummet by over 16% following the meteoric rise of a Chinese artificial intelligence (AI) chatbot, DeepSeek. The app, launched last week, has quickly become the most downloaded free app in the United States, causing significant ripples across global tech markets.
The sudden success of DeepSeek has also impacted the share prices of other AI-focused firms, including Microsoft, Google, and European chipmakers, as investors grow increasingly concerned about the future of AI dominance and market competition.
What Is DeepSeek?
DeepSeek is an AI chatbot powered by the open-source DeepSeek-V3 model, reportedly developed at a fraction of the cost of its competitors. Its creators claim the model was trained for just $6 million – a stark contrast to the billions spent by Western firms like OpenAI. DeepSeek’s developers leveraged open-source technologies and existing innovations to build a highly efficient AI system that demands significantly less computing power.
This approach has sparked debate, with some experts questioning the scalability and longevity of the platform. However, DeepSeek’s affordability and performance have positioned it as a disruptive force in the AI sector.
Impact on Global Tech Markets
The emergence of DeepSeek has unsettled stock markets in both the US and Europe. Nvidia’s share price dropped by 16.9% on Monday, while rival Broadcom saw a similar decline of 17.4%. Tech giants Microsoft and Alphabet (Google’s parent company) also suffered losses, with their values falling by 2.14% and over 4%, respectively.
In Europe, the Dutch chip equipment maker ASML experienced a 7% drop, and Siemens Energy, a supplier of AI-related hardware, saw its shares plummet by 20%.
Fiona Cincotta, a senior market analyst at City Index, commented:
“The market wasn’t expecting a low-cost Chinese AI alternative to emerge so rapidly. This raises questions about the profitability of existing players who have already invested heavily in expensive AI infrastructure.”
Singapore-based tech equity advisor Vey-Sern Ling echoed this sentiment, warning that DeepSeek’s rise could undermine confidence in the entire AI supply chain.
The Broader AI Battle
DeepSeek’s success has arrived during a period of increasing tension between the US and China over access to advanced AI technology. The US has implemented restrictions on exporting high-performance AI chips to China, compelling Chinese developers to innovate with locally available resources and alternative approaches.
The result? Chinese AI models that require far less computing power, disrupting traditional assumptions about the industry’s cost structure.
Despite its progress, DeepSeek still faces challenges. US banking giant Citi noted that while the chatbot could threaten American dominance in AI, China’s restricted access to advanced chips may hinder its long-term potential.
DeepSeek Faces Cyberattacks Amid Popularity Surge
Amid its sudden rise, DeepSeek announced on Monday that it had temporarily limited new user registrations due to “large-scale malicious attacks” on its platform. A statement from the company reassured existing users that services remain unaffected:
“Due to malicious attacks on DeepSeek’s services, we are temporarily limiting registrations to ensure uninterrupted service. Thank you for your understanding.”
Who Founded DeepSeek?
DeepSeek was founded in 2023 by Liang Wenfeng in Hangzhou, China. Liang, a graduate in information and electronic engineering, previously established a hedge fund that supported DeepSeek’s development.
Reports suggest Liang stockpiled Nvidia A100 chips, now banned from export to China, pairing them with lower-cost hardware to build the AI model. His strategic use of resources has been credited with enabling DeepSeek’s cost-effective development.
Liang recently met with Chinese Premier Li Qiang and, in a 2024 interview, expressed surprise at the global reaction to DeepSeek:
“We didn’t anticipate pricing would become such a focal issue. Our goal was simply to innovate within our own means.”
A Sputnik Moment for AI?
DeepSeek’s debut has drawn comparisons to the 1957 launch of Sputnik by the Soviet Union, which caught the US off-guard and sparked a technological race. Silicon Valley investor Marc Andreessen has labelled the chatbot’s rise as “AI’s Sputnik moment”.
As Chinese developers continue to make strides in AI innovation, Western tech giants face mounting pressure to adapt and compete in a rapidly shifting landscape.
Conclusion
DeepSeek’s low-cost approach could redefine the AI industry, challenging the dominance of established players like Nvidia, Microsoft, and OpenAI. While its long-term viability remains uncertain, its rapid success has demonstrated the potential for innovation in unexpected places – and sent shockwaves through global markets.