Wall Street Stocks Plunge Up to 10% as DeepSeek Threatens U.S. Tech

Nvidia shares tumbled more than 10% in Wall Street’s trading, leading a widespread selloff in tech stocks amid mounting concerns over Chinese AI startup DeepSeek, which threatens U.S. dominance in the sector.

DeepSeek’s cutting-edge AI model delivers comparable results at significantly lower costs, calling into question the massive investments made by industry giants like Nvidia, led by CEO Jen-Hsun Huang.

DeepSeek’s pioneering AI model achieves state-of-the-art performance at a fraction of the usual cost, suggesting companies can accomplish more with less. This challenges the prevailing notion that the high computational power required for AI benefits chipmakers like Nvidia.

What sets DeepSeek apart is its open-source approach, unlike OpenAI, allowing anyone to contribute to its development and significantly reducing costs. Furthermore, its flagship model, DeepSeek-V2, offers free access with a daily limit of 50 messages, positioning itself as a formidable competitor to OpenAI and other major U.S. AI firms.

The rise of DeepSeek has also sparked concerns about the soaring AI-related expenditures of American tech companies. For instance, Meta plans to invest between $60 billion and $65 billion this year, but DeepSeek’s efficiency raises questions about whether such massive spending is truly necessary to achieve similar results.

Nvidia isn’t the only company facing losses. Other major players in the sector are also down, including:

• ARM (-5.5%)
• Broadcom (-4.9%)
• Taiwan Semiconductor (-4.5%)
• Qualcomm (-2.8%)
• AMD (-2.5%)
• Intel (-2.0%)

Shifting Expectations in AI

DeepSeek’s emergence is reshaping expectations in the AI sector, challenging the belief that advancements will inevitably drive demand for chips and data centers. The startup’s innovative approach has prompted a reassessment of the industry’s future trajectory.

The small Hangzhou-based company behind DeepSeek has gained significant traction, surpassing ChatGPT to become the top-rated free app in the U.S. App Store this Monday.

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Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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