DeepSeek Triggers $500 Billion Nvidia Selloff as Cheap Chinese AI Shocks Markets
A low-cost Chinese AI model from DeepSeek sparks a massive tech stock crash, wiping out over $500 billion in Nvidia's market value and challenging U.S. industry dominance.
U.S. chip-maker Nvidia leads a massive rout in tech stocks as the emergence of a low-cost Chinese generative AI model threatens American dominance in the industry. The chatbot, developed by Chinese startup DeepSeek, shows the ability to match the capacity of U.S. AI leaders for a fraction of the cost. Nvidia shares fall more than 15 percent in midday trading, erasing over $500 billion in market value, while the tech-rich Nasdaq index drops more than 3 percent.
DeepSeek claims it spent only $5.6 million developing its model, a stark contrast to the billions poured into AI by U.S. tech giants like Microsoft and Google. The startup's chatbot currently ranks as the top-rated free application on Apple’s U.S. App Store. Venture capitalist Marc Andreessen describes DeepSeek's emergence as a "Sputnik moment," highlighting a significant challenge to U.S. technological supremacy.
The market turmoil forces investors to reconsider capital expenditure outlooks and tech valuations globally. Other major chip-makers like Broadcom and ASML also experience steep stock declines, while European and Asian markets largely slide. As DeepSeek navigates large-scale malicious attacks on its services, analysts note that the focus now shifts to whether China can win the AI race by doing things better, quicker, and more cost-effectively than the United States.