US tech giant Nvidia lost over a sixth of its value after the surging popularity of a Chinese artificial intelligence (AI) app spooked investors in the US and Europe.
DeepSeek, a Chinese AI chatbot reportedly made at a fraction of the cost of its rivals, launched last week but has already become the the most downloaded free app in the US.
AI chipmaker Nvidia and other tech firms connected to AI, including Microsoft and Google, saw their values tumble on Monday in the wake of DeepSeek’s sudden rise.
In the US, AI chipmaker Nvidia ended Monday’s trading having plunged 16.9% while its rival Broadcom slumped 17.4%.
Other tech firms also sank, with Microsoft down 2.14% and Google’s owner Alphabet down over 4%.
When investors in the US and Europe became alarmed by the growing popularity of a Chinese artificial intelligence (AI) app, the US tech giant Nvidia lost more than a sixth of its value.
Launched just last week, DeepSeek, a Chinese AI chatbot that is said to be produced at a fraction of the price of its competitors, has already surpassed all other free apps in the US in terms of downloads.
Following DeepSeek’s sharp increase, chipmaker Nvidia and other AI-related tech companies, such as Microsoft and Google, saw a decline in their stock prices on Monday.
Additionally, DeepSeek announced on Monday that it would temporarily restrict registrations due to “large-scale malicious attacks” on its software.
According to reports, the DeepSeek chatbot was created for a small portion of the price of its competitors, which begs the question of how much investment US companies are planning to make and how long America will dominate AI.
OpenAI promised last week to invest $500 billion (£400 billion) in the development of AI infrastructure in the United States, joining a group of other companies doing the same.
It is “the largest AI infrastructure project by far in history” that will help keep “the future of technology” in the United States, according to President Donald Trump, who made the announcement in one of his first statements since taking office again.
According to its researchers, the open source DeepSeek-V3 model, which powers DeepSeek, was trained for about $6 million, a substantial sum compared to the billions spent by competitors.
Others in the field of AI, however, have contested this claim.
According to the researchers, they make use of open source code, which is software that is freely available for anyone to use, alter, or distribute.
As the US limits the sale of the cutting-edge chip technology that drives AI to China, DeepSeek emerges.
Chinese AI developers have collaborated and tried out novel approaches to the technology in order to continue their work without consistent supplies of imported advanced chips.
As a result, AI models now need significantly less processing power than they did previously.
It also implies that they are far less expensive than previously believed, which could completely transform the market.
The company claimed that DeepSeek-R1 would perform “on par with” one of OpenAI’s most recent models for tasks like math, coding, and natural language reasoning after its launch earlier this month.
DeepSeek-R1 was dubbed “AI’s Sputnik moment” by Silicon Valley venture capitalist and Trump advisor Marc Andreessen, alluding to the Soviet Union’s 1957 satellite launch.
The US was thought to have been taken by surprise by their rival’s technological accomplishment at the time.
The unexpected rise in popularity of DeepSeek has shocked both the US and European stock markets.
While its rival Broadcom fell 17 points 4 percent, AI chipmaker Nvidia ended Monday’s trading in the US down 16 points 9 percent.
Other tech companies also suffered; Alphabet, the parent company of Google, was down more than 4% and Microsoft was down 2 points 14 percent.
In Europe, shares of Siemens Energy, a company that manufactures AI-related hardware, fell by a fifth, while ASML, a Dutch chip equipment manufacturer, saw its share price close Monday’s trading at a loss of over 7%.
Fiona Cincotta, a senior market analyst at City Index, stated, “The market has been a little caught off guard by this idea of a low-cost Chinese version, which hasn’t necessarily been forefront.”.
Therefore, if you suddenly get this low-cost AI model, it will cause competitors’ profits to be questioned, especially considering how much they have already spent on more costly AI infrastructure. “..”.
Vey-Sern Ling, a technology equity adviser based in Singapore, told the BBC that it might “potentially derail the investment case for the entire AI supply chain.”.
However, Wall Street banking behemoth Citi warned that although DeepSeek might threaten the market dominance of US firms like OpenAI, problems faced by Chinese companies might impede their growth.
“We estimate that US access to more advanced chips is an advantage in an inevitably more restrictive environment,” analysts wrote in a report.
On Monday, DeepSeek announced that it had been the target of a cyberattack.
“To ensure continued service, we are temporarily limiting registrations due to large-scale malicious attacks on DeepSeek’s services,” the company said in a statement.
“Older users can log in as normal. Thank you for your support and understanding. “.”.