Big technology stocks including Nvidia, Microsoft, Meta and Tesla fell sharply in pre-market trading on concerns that Chinese artificial intelligence startups could threaten America's dominance in AI.
NVIDIA stock plummeted nearly 12% following reports about DeepSeek's capabilities. DeepSeek is a China-based startup that has been making waves in the industry since announcing its free, open source, large-scale language model in December.
DeepSeek was reportedly developed in just two months and at a cost of less than $6 million. This is in stark contrast to the billions of dollars that big Western technology companies typically spend on AI research and infrastructure.
The move triggered a global stock market selloff and raised concerns about the sustainability of America's dominance in the sector, particularly affecting semiconductor companies.
Shares of Nvidia, a leading company in AI-driven chip design and a big beneficiary of the AI boom, plunged 11.8% as of 7:05 a.m. ET before the market opened on Monday.
Microsoft, which has poured billions of dollars into ChatGPT developer Sam Altman's OpenAI, fell 4.1% in premarket trading. Meta's stock price fell 1.7%, and Tesla stock fell more than 2.7% in premarket trading.
European semiconductor makers also faced significant declines, with Netherlands-based ASML and ASM International falling 8.9% and 13.6%, respectively.
Meanwhile, before Monday's opening bell, Nasdaq futures were down 2.3%, S&P 500 futures were down 1.3% and Dow Jones Industrial Average futures were down 0.9%.
DeepSeek's rapid progress has sparked increased scrutiny of the huge sums of money major US companies are pouring into AI research, raising questions about efficiency and cost-effectiveness.
“Deep Seek obviously doesn't have access to as much computing power as the US hyperscalers, but it has managed to develop a model that appears to be highly competitive,” said Srini Pajri, a semiconductor analyst at Raymond James. Ta. On Monday's memo.
Meanwhile, Citi analysts acknowledge that the technological advances in deep seek are raising questions among investors about the cost of computing power.
But they stress that U.S. companies still have a big advantage because they have access to the most sophisticated chips.
“While US companies' dominance in cutting-edge AI models could potentially be challenged, access to high-end GPUs remains a key differentiator,” Citi analysts said in a note. .
The market disruption coincides with a broader push by the U.S. government to strengthen its AI leadership.
President Trump recently announced a $500 billion AI initiative known as Stargate.
The huge amount of money being invested in this project, which includes the involvement of top companies such as OpenAI, Oracle, and SoftBank, highlights the strategic importance of advanced chips in maintaining America's competitiveness in AI development.
