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DeepSeek Shakes Up Stocks as Traders Fear for US Tech Leadership

Jan 27, 2025 - financialpost.com
Chinese AI startup DeepSeek has disrupted global technology stocks by introducing a cost-effective AI model that operates on less-advanced chips, challenging the dominance of American tech giants like Nvidia. This development has raised concerns about the high valuations of companies heavily invested in AI technology. As a result, Nasdaq 100 futures dropped by 2.3%, and Nvidia shares fell over 3% in Asian trading. The emergence of DeepSeek suggests that China's AI capabilities are catching up, despite trade restrictions, and highlights the intensifying competition in the AI sector.

The DeepSeek model, praised for its transparency and effectiveness, has quickly gained popularity, topping Apple's App Store rankings. This has led to positive reactions in Chinese AI-related stocks, with significant gains in the Hang Seng Tech Index. The situation poses a challenge to the investment strategies of Silicon Valley, which have relied on significant capital expenditure for AI advancements. As major tech companies like Apple and Microsoft prepare to release earnings reports, the market remains cautious about the sustainability of the AI-driven rally in the tech sector.

Key takeaways:

  • Chinese AI startup DeepSeek has disrupted global tech stocks, raising concerns about US technological dominance.
  • DeepSeek's AI model is cost-effective and operates on less-advanced chips, challenging the high valuations of companies like Nvidia.
  • Nasdaq 100 futures and Nvidia shares fell as investors reconsidered the AI investment landscape.
  • DeepSeek's emergence highlights intensifying competition in AI, questioning the dominance of established US tech firms.
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