Chinese AI Model Shakes Tech Stocks
DeepSeek, a Chinese artificial intelligence (AI) startup, has made waves with its latest AI model, triggering a significant decline in the valuations of US and European tech stocks.
Valuations Under Scrutiny
DeepSeek's model has ascended to the top of Apple's App Store, challenging more expensive offerings from OpenAI and raising concerns about the substantial investments in AI by companies like Microsoft, Meta, and Alphabet.
Nvidia Tumbles
AI chip manufacturer Nvidia, whose shares have surged ninefold over the past two years, experienced a 10% premarket drop, potentially reducing its market value by $340 billion.
Tech Sector Rout
The Nasdaq 100 futures plunged by 3.9%, marking the most significant intraday drop since August. European tech stocks also took a hit, with ASML Holding NV declining by 12%.
DeepSeek's Challenge
Union Bancaire Privee's Vey-Sern Ling asserts that DeepSeek demonstrates the possibility of developing AI models at a lower cost, potentially disrupting the entire AI supply chain.
Valuation Concerns
The tech rout coincides with a crucial week for earnings reports from major companies like Apple and Microsoft. Investors are concerned about inflated valuations and slower profit growth.
Competitive AI Model
DeepSeek's model is hailed as competitive with offerings from OpenAI and Meta Platforms. It provides transparency in its reasoning and has received positive user reviews.
China's AI Progress
Chinese AI-related stocks responded positively, with Merit Interactive Co. surging to daily limits. DeepSeek's model challenges the perception that China's AI technology is lagging behind its US counterparts.
Competition Intensifies
Saxo Markets' Charu Chanana warns that DeepSeek's emergence signals increasing competition in the AI space, potentially threatening established companies.