Nvidia stocks drop as Chinese AI App stirs market concerns
Nvidia’s stock plummeted by 16.9% after the rapid rise of DeepSeek, a Chinese AI chatbot, which spooked investors. Launched last week, DeepSeek is reportedly built for a fraction of the cost of its competitors and quickly became the most downloaded free app in the US. This AI tool challenges the dominance of US firms like Nvidia, Microsoft, and Google.
DeepSeek’s launch has raised concerns in the tech world, especially since it was developed with significantly lower investment compared to US counterparts, questioning the future of AI technology.
DeepSeek’s success stems from the open-source DeepSeek-V3 model, which cost around $6 million to develop—much less than the billions US firms spend. It also utilizes existing technology and open-source code, contributing to its low cost. The model competes with top AI tools such as OpenAI’s latest offerings, delivering comparable performance in tasks like coding and language reasoning.
While the US restricts AI chip exports to China, Chinese developers like DeepSeek have innovated with less powerful but cheaper alternatives, reducing their reliance on advanced chips. This shift could disrupt the AI industry by making powerful AI models more affordable and accessible.
The news has caused significant market reactions. Nvidia, Broadcom, and other tech firms saw their stocks fall sharply. In Europe, companies like ASML and Siemens Energy also suffered losses. Market analysts view DeepSeek’s success as a potential challenge to the US’s AI leadership, possibly undermining the investments already made in high-cost AI infrastructure.
DeepSeek’s founder, Liang Wenfeng, developed the chatbot in Hangzhou, China, after building up a stockpile of Nvidia chips before the export ban. Despite facing cyberattacks, DeepSeek is temporarily limiting new registrations, citing the need to protect its services. Experts remain cautious, noting that Chinese firms could face challenges in advancing their technology without access to US chips.
