California: The new artificial intelligence model from Chinese AI startup DeepSeek ignited a dramatic sell-off of $1 trillion worth of U.S. and European tech stocks as investors started questioning inflated valuations at some of America’s largest companies.
The DeepSeek model shot to the top of Apple’s App Store charts over the weekend, directly challenging higher-priced AI models from companies like OpenAI. This has raised concerns over the hundreds of billions in planned investments from tech giants such as Microsoft, Meta, and Alphabet in the AI space.
However, it also brought out the limelight on AI chip maker Nvidia, whose stock has risen ninefold over the last two years, making it the world’s most valuable company. However, on Monday, Nvidia shares fell more than 10% in premarket trading. It will be nearly $340 billion from its market value if it holds through the trading session.
Nasdaq 100 futures declined as much as 5.2% in overnight trading before climbing back to a 3.9% loss by 7:30 a.m. New York. Tech stocks hurt most in Europe, as chip equipment maker ASML Holding declined by as much as 12%. Cboe Volatility Index jumped to 21.5. If these losses continue, the combined market capitalization of the Nasdaq 100 and Europe’s Stoxx 600 technology index could suffer a $1.2 trillion wipeout.
“DeepSeek shows that it is possible to build very strong AI models at a fraction of the cost,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “This could potentially undermine the entire AI investment narrative, which is driven by massive spending from a small group of major players”, he added.
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