Investors are reevaluating their positions in major technology stocks after the Chinese startup DeepSeek launched a groundbreaking artificial intelligence assistant. The new AI model, which reportedly operates at a fraction of the cost and data requirements of current industry leaders, has raised questions about the dominance of Western companies in the AI sector.
On Monday, stocks of prominent tech companies experienced significant declines. Nvidia, a leading AI chipmaker, saw its shares fall by 10%, while Oracle dropped by 8%, and Palantir, an AI data analytics firm, lost 7% in pre-market trading. Futures on the Nasdaq 100 slid nearly 4%, pointing to potential major losses.
DeepSeek’s assistant, which has quickly become the most downloaded app on the Apple Store, surpassing U.S. rival ChatGPT, offers a free AI alternative that could disrupt the current market. The prospect of a more accessible and cost-effective AI solution has led investors to question the sustainability of high levels of spending and investment by Western tech giants like Apple and Microsoft.
From Tokyo to Amsterdam, the ripple effect was felt as shares in AI-focused companies tumbled. “We still don’t know the details and nothing has been 100 percent confirmed regarding the claims,” said Jon Withaar, a senior portfolio manager at Pictet Asset Management. “But if there truly has been a breakthrough in the cost to train models from over $100 million to an alleged $6 million, this is very positive for productivity and AI end users.”
The surge in AI development has attracted massive capital inflows into equity markets over the past 18 months, driving company valuations to record highs. Nvidia alone has risen by over 200% during this period. However, DeepSeek’s advancements are prompting a market reassessment.
Marc Andreessen, a prominent Silicon Valley venture capitalist, described DeepSeek’s R1 model as AI’s “Sputnik moment,” referencing the historic satellite launch that ignited the space race in the 1950s. “DeepSeek R1 is one of the most amazing and impressive breakthroughs I’ve ever seen — and as open source, a profound gift to the world,” he commented on social media platform X.
In Europe, tech equipment maker ASML, whose customers include Taiwan-based TSMC, Intel, and Samsung, dropped almost 11%. In Japan, investor SoftBank Group slid more than 8%, following its recent $19 billion commitment to fund Stargate, a data-center joint venture with OpenAI.
Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore, noted that the market is now questioning the capital expenditure of major tech companies. “The idea that the most cutting-edge technologies in America are the most superior globally — there’s concern that this perspective might start to change,” added Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management. “I think it might be a bit premature,” he said.
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DeepSeek's 'Sputnik moment' prompts investors to sell big AI players
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