The tech world was rocked on Monday as Nvidia, a leader in semiconductor technology, suffered a dramatic sell-off after news broke of a low-cost Chinese generative AI model that could challenge American dominance in the AI industry.
DeepSeek, a startup based in Hangzhou, China, claims to have developed a chatbot that rivals the capabilities of top U.S. AI systems—at a fraction of the cost.
The announcement sent shockwaves through the stock market. Nvidia, whose chips are the backbone of AI innovation, saw its shares plummet nearly 17% on Wall Street, wiping out around $600 billion of its market value.
The tech-heavy Nasdaq index also tumbled more than 3%, reflecting widespread concern about the future of U.S. tech leadership. DeepSeek’s chatbot has quickly gained traction, becoming the top-rated free app on Apple’s U.S. App Store.
Remarkably, the company claims to have developed the model with a modest $5.6 million investment—an amount that pales in comparison to the billions poured into AI by American tech giants like OpenAI, Google, and Microsoft.
“The focus is shifting to whether China can outperform the U.S. in terms of speed, efficiency, and cost,” said Kathleen Brooks, research director at trading platform XTB. “If they succeed, this could redefine the global AI race.”
However, not everyone is ready to take DeepSeek’s claims at face value. Art Hogan, chief market strategist at B. Riley Wealth, described the market reaction as “shoot first, ask questions later.” He added, “There’s still a lot of skepticism around whether these claims are credible and what they mean for the broader tech landscape.”
DeepSeek’s rapid rise hasn’t been without challenges. On the same day as its announcement, the company reported facing “large-scale malicious” cyberattacks, prompting it to temporarily limit new user registrations.
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