The tech sector has plunged after China released a free ChatGPT rival operating on cheaper and less advanced chips
Chinese AI startup DeepSeek sent shockwaves through global tech stocks on Monday, causing Nasdaq futures in Japan to dip more than 3%, sparking concerns among market players about US technological dominance.
Nasdaq 100 futures dropped by as much as 3.2%, and S&P 500 contracts declined 1.9% as of 3:23am in New York. In early European trading, Frankfurt-listed Nvidia shares fell around 7%, while Tesla, Amazon, and Meta saw drops of over 2%. Shares of Dutch computer chip maker ASML Holding NV were down more than 8%.
Stock futures tumbled after DeepSeek rolled out its new AI model, which is reported to be cost-effective and able to run on less advanced chips than tools such as OpenAI’s ChatGPT.
The newly launched free assistant has cast doubt on the high valuations of companies like Nvidia, a leader in the global AI stock boom, whose chips have been considered essential for the technology’s growth.
“DeepSeek shows that it is possible to develop powerful AI models that cost less,” Vey-Sern Ling, managing director at Union Bancaire Privee, told Bloomberg. “It can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers.”
The Chinese startup’s AI model, founded by quant fund chief Liang Wenfeng, is quickly gaining recognition as a strong competitor to OpenAI and Meta Platforms’ latest offerings. Its assistant outperformed ChatGPT to become the top-rated free app on Apple’s App Store in the US on Monday.
The new assistant is set to challenge Silicon Valley’s dominance, potentially disrupting the global tech landscape and shifting the course of the “AI arms race,” said Nigel Green, CEO of financial advisory deVere Group, as quoted by CNBC.
DeepSeek researchers revealed in a paper last month that their DeepSeek-V3 model, launched on January 10, was trained using Nvidia’s H800 chips, costing under $6 million, according to Reuters. The H800 chips, while not top-tier, were reportedly developed as a lower-capacity option to bypass sales restrictions to China, before later being banned under US sanctions.
“The idea that the most cutting-edge technologies in America, like Nvida and ChatGPT, are the most superior globally, there’s concern that this perspective might start to change,” Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management, told Reuters.
Experts say the emergence of DeepSeek signals intensifying competition in the AI sector with future competitors likely to evolve rapidly, presenting greater challenges to established companies.
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