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DeepSeek buzz puts tech stocks on track for $1 trillion drop

Jan 27, 2025 - financialpost.com
Chinese AI startup DeepSeek has launched a new AI model that has rapidly climbed to the top of Apple's app store charts, challenging established U.S. competitors like OpenAI. This development has triggered a significant selloff in U.S. and European tech stocks, with a potential market capitalization loss of up to $1.2 trillion. Investors are questioning the high valuations of major tech companies, including Nvidia, whose shares dropped significantly in premarket trading. The emergence of DeepSeek's cost-effective AI model raises doubts about the massive investments made by companies like Microsoft, Meta, and Alphabet in AI technology.

The situation highlights the intensifying competition in the AI sector, with DeepSeek's success suggesting that China's AI capabilities may not be as far behind the U.S. as previously thought. This has led to a reevaluation of the AI investment landscape, particularly concerning the high spending by a few dominant players. The Nasdaq 100 futures experienced a notable drop, and European tech stocks also faced losses. The development underscores the potential for new competitors to challenge established tech giants, prompting a reassessment of strategies in the AI industry.

Key takeaways:

  • DeepSeek's AI model has caused a significant drop in U.S. and European tech stocks, raising concerns about inflated valuations.
  • Nvidia's shares fell significantly, impacting its market value, as Nasdaq 100 futures experienced a notable decline.
  • DeepSeek's success challenges the dominance of U.S. AI companies, highlighting the potential for competitive AI models from China.
  • The emergence of DeepSeek raises questions about the substantial investments in AI by major tech companies and the future of AI competition.
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