According to Reuters, China's newly launched low-cost artificial intelligence (AI) model has caused investors around the world to sell off technology stocks due to concerns that the dominant position of AI giants like Nvidia could be shaken.
The concern wiped out $539 billion from Nvidia’s market capitalization on January 27. No company has ever faced such a drop on Wall Street.
Last week, Chinese startup DeepSeek launched a free AI assistant that it claims uses less data and costs much less than existing services. As of January 27, the app had surpassed the US’s ChatGPT in downloads on Apple’s App Store.
If DeepSeek does indeed outperform, it could disrupt the entire AI market, with demand for chips and electricity to power AI models and data centers all falling dramatically, says Brian Jacobsen, a market economist at Annex Wealth Management.
This has caused AI-related stocks to slow down after an 18-month boom fueled by massive investment from the stock market, especially in the US, because of the prospects that this type of technology can bring.
Just last week, US AI stocks surged after President Donald Trump announced a $500 billion investment plan into AI infrastructure, through a joint venture called Stargate.
Then a series of companies also joined this project, including Softbank, Oracle and OpenAI - the "father" of ChatGPT.
Mr Trump said DeepSeek could be “a wake-up call” but could also be a positive development.
Investors turned to safer assets such as government bonds and stable currencies amid market volatility. Meanwhile, the yield on the 10-year US Treasury note reportedly fell to 4.53%.
