Chinese startup DeepSeek has disrupted the global tech landscape, causing a market stir after its AI Assistant overtook ChatGPT to become the top-rated free app on the U.S. Apple App Store. The achievement did not only marked a breakthrough for the company but has also triggered a selloff in tech stocks as investors had to reassess competitive dynamics in artificial intelligence.
DeepSeek’s AI Assistant is powered by the DeepSeek-V3 model, which operates using more affordable chips and fewer resources than its competitors. This challenges the belief that cutting-edge AI development requires expensive hardware and vast datasets. The model’s efficiency has raised concerns about the future demand for premium chips in AI applications. This left key players like Nvidia facing significant stock declines.
The market reaction was swift, with Nasdaq futures dropping over 3% and the S&P 500 futures losing nearly 2%. Shares of prominent tech companies such as Nvidia, Microsoft, Meta, and Alphabet saw sharp declines. European and Japanese tech stocks were similarly impacted, with ASML and SoftBank recording notable losses.
The cryptocurrency market wasn’t left out as major pairs lost 6% and above in their value in the last 24 hours.
While some analysts believe DeepSeek’s cost-effective approach could benefit AI users in the long term, the immediate effects have left chipmakers and large AI firms scrambling to adapt. Another major factor to look at for is that DeepSeek’s breakthrough has intensified the AI rivalry between China and the United States. This also has sparked debates over innovation and the efficacy of export controls designed to limit China’s tech development.
