Nvidia and several prominent U.S. technology companies faced sharp declines on Monday as a global sell-off was triggered by concerns over competition in the artificial intelligence (AI) sector. The worries were sparked by the emergence of DeepSeek, a Chinese startup that has made waves with its AI advancements, raising questions about the future of U.S. leadership in AI technology.
Nvidia, a key player in the chip design market and a significant beneficiary of the AI boom, saw its shares plummet by 17.4%, marking its worst performance since March 2020. The company’s stock hit lows not seen since October, contributing to broader declines in AI-related stocks and dragging down the overall U.S. stock market. Other major chipmakers, such as Micron and Arm Holdings, also experienced significant losses, falling 10% and 9%, respectively. Broadcom and Advanced Micro Devices (AMD) lost 16% and 6%, respectively, further highlighting the broad impact of the sell-off.
Additionally, power companies tied to the AI infrastructure, like Constellation Energy and Vistra, saw their stocks dive, with losses exceeding 19% and 27%, respectively. The sell-off also spread internationally, with European chip companies like ASML and ASM International experiencing sharp declines in their stock prices. In Asia, chip-related stocks, including Advantest and Tokyo Electron in Japan, saw widespread losses.
The catalyst for this global sell-off was DeepSeek’s announcement in late December of its open-source, free-to-use large language model, which was developed in just two months at a cost of under $6 million—far less than what U.S. companies typically spend on similar projects. This development raised eyebrows in the tech world, especially after DeepSeek’s reasoning model was reported to outperform OpenAI’s latest model in several third-party tests.
The success of DeepSeek’s low-cost model has raised concerns about the hefty investments made by U.S. tech giants in AI models and infrastructure. The rapid progress of DeepSeek’s models with minimal computing resources has cast doubt on the competitiveness of American companies, especially when compared to the lower costs associated with Chinese startups. Analysts have pointed out that despite DeepSeek’s impressive results, the company does not yet have access to the same computational power as leading U.S. companies like Amazon and Microsoft, who dominate the AI sector due to their vast computing infrastructure.
Nvidia, which leads the market in graphics processing units (GPUs), a critical component for training large AI models, remains the primary supplier for AI-focused companies. However, the increasing competition from lower-cost models like DeepSeek’s could challenge the U.S. dominance in the field, although access to superior GPUs still serves as a major barrier for rivals.
Despite skepticism over the true cost of DeepSeek’s model, with some analysts questioning whether the reported $6 million figure excludes other research and development expenses, concerns over the growing competition are undeniable. While U.S. companies may still have an edge in the hardware needed to support AI development, the rise of competitors like DeepSeek has sparked a sense of urgency among major players in the tech industry to maintain their competitive advantage.