NEW YORK: US chip-maker Nvidia led a rout in tech stocks on Monday (Jan 27) after the emergence of a low-cost Chinese generative AI model that could threaten American dominance in the fast-growing industry.
The chatbot developed by DeepSeek, a startup based in the eastern Chinese city of Hangzhou, has apparently shown the ability to match the capacity of US AI pace-setters for a fraction of the investments made by American companies.
Shares in Nvidia, whose semiconductors power the AI industry, fell nearly 17 per cent on Wall Street, erasing nearly US$600 billion of its market value.
Nvidia’s US$589 billion loss in stock market value is the deepest ever one-day loss for a company on Wall Street, according to LSEG data. It was more than double the previous one-day record loss, set by Nvidia last September.
The tech-rich Nasdaq index finished down more than three per cent.
DeepSeek, whose chatbot became the top-rated free application on Apple’s US App Store, said it spent only US$5.6 million developing its model – peanuts when compared with the billions US tech giants have poured into AI.
US “tech dominance is being challenged by China”, said Kathleen Brooks, research director at trading platform XTB.
“The focus is now on whether China can do it better, quicker and more cost effectively than the US, and if they could win the AI race,” she said.
Art Hogan, chief market strategist at B. Riley Wealth, described the market’s response on Monday as “shoot first, ask questions later”, noting that some are sceptical of the Chinese company’s assertions.
“Everyone is trying to figure out ‘Can it be believed?’ and ‘What does it mean,'” Hogan said.
As DeepSeek rattled markets, the startup on Monday said it was limiting the registration of new users due to “large-scale malicious” cyberattacks on its services.
AI players Meta and Microsoft are among the tech giants scheduled to report earnings this week, offering opportunities for comment on the emergence of the Chinese company.
Shares in another US chip maker, Broadcom, fell 17.4 per cent while Dutch firm ASML, which makes the machines used to build semiconductors, saw its stock tumble 6.7 per cent.
Constellation Energy, which is planning to build significant energy capacity for AI, sank more than 20 per cent.
Wall Street’s broad-based S&P 500 index shed 1.5 per cent while the Dow advanced 0.7 per cent.
In Europe, the Frankfurt and Paris stock exchanges closed in the red while London finished flat.
Asian stock markets mostly slid.
Just last week following his inauguration, Trump announced a US$500 billion venture to build infrastructure for AI in the United States led by Japanese giant SoftBank and ChatGPT-maker OpenAI.
SoftBank tumbled more than eight per cent in Tokyo on Monday while Japanese semiconductor firm Advantest was also down more than eight per cent and Tokyo Electron was off almost five per cent.
