Nvidia Loses Nearly $600 Billion as China's DeepSeek Shakes Tech Stocks

This week, US chip-maker Nvidia led a downturn in tech stocks following the emergence of a low-cost Chinese generative AI model that could challenge American dominance in the growing AI industry.

The chatbot developed by DeepSeek, a startup based in Hangzhou, China, has reportedly matched the capabilities of US AI leaders with a fraction of the investment. DeepSeek claimed to have spent only $5.6 million to develop its AI model, a stark contrast to the billions invested by US tech giants.

Nvidia, which powers much of the AI industry with its semiconductors, saw its shares drop nearly 17% on Wall Street, wiping out nearly $600 billion of its market value. This led to a broader sell-off in tech stocks, with the Nasdaq index falling more than 3%.

DeepSeek's chatbot has gained significant attention, becoming the top-rated free app on Apple’s US App Store. The company's rapid rise has raised questions about whether China can outpace the US in AI development, especially given the low cost of its AI model.

Kathleen Brooks, research director at trading platform XTB, noted that US tech dominance is being challenged by China. "The focus is now on whether China can do it better, quicker, and more cost-effectively than the US," she said.

Art Hogan, chief market strategist at B. Riley Wealth, commented that the market's response has been one of uncertainty, with many questioning the claims made by DeepSeek and the impact on the global AI race.

As the controversy surrounding DeepSeek continued, the startup announced it was limiting new user registrations due to "large-scale malicious" cyberattacks.

In addition to Nvidia, shares in other US chip-maker Broadcom fell by 17.4%, and Dutch firm ASML, which makes semiconductor manufacturing machines, saw its stock drop by 6.7%. The broader S&P 500 index shed 1.5%, while the Dow Jones gained 0.7%.

Looking ahead, tech giants like Meta and Microsoft are set to report earnings this week, and their commentary on DeepSeek's emergence will be closely watched by investors.

Despite the market's response, DeepSeek's rapid growth highlights the shifting dynamics in the AI race, with China increasingly becoming a key player in the industry.

Key market figures as of 2120 GMT:

• New York: Dow: +0.7% at 44,713.58; S&P 500: -1.5% at 6,012.28; Nasdaq: -3.1% at 19,341.83
• London: FTSE 100: Flat at 8,503.71
• Paris: CAC 40: -0.3% at 7,906.58
• Frankfurt: DAX: -0.5% at 21,282.18
• Tokyo: Nikkei 225: -0.9% at 39,565.80
• Hong Kong: Hang Seng Index: +0.7% at 20,197.77
• Shanghai: Composite: -0.1% at 3,250.60

This week also saw the Euro slightly decline against the dollar, and Brent crude oil fell by 1.8% to $77.08 per barrel.