Last week, the launch of DeepSeek, a Chinese AI chatbot app, sparked chaos in the U.S. markets and raised concerns about the future of America's AI dominance. DeepSeek's AI Assistant, powered by DeepSeek-V3, has surpassed rival ChatGPT to become the top-rated free app on Apple's App Store in the United States.
At first glance, DeepSeek appears similar to other chatbots. Like OpenAI's ChatGPT or Google's Gemini, users can open the app (or website), ask it questions about anything, and receive responses. So what's the catch? Why has its emergence shaken the U.S. tech industry?
The standout feature of DeepSeek is the company's claim that it was developed at a fraction of the cost of industry-leading models like OpenAI, thanks to its reliance on fewer advanced chips. While OpenAI reportedly spent $5 billion last year alone, DeepSeek's developers say it built their latest model for less than $6 million. Needless to say, DeepSeek is not technologically inferior to OpenAI ChatGPT.
This development has cast doubt on the rationale behind the billions of dollars pledged by U.S. tech companies for AI development, leading to a decline in shares of several major players.
Shares of Nvidia, the AI chip designer and recent Wall Street favorite, plunged by 17% by the close of U.S. markets on Monday. To put it in even starker terms, the company lost nearly $600 billion in market value — the biggest single-day drop in U.S. stock market history. This more than doubled the previous record of $240 billion set by Meta nearly three years ago.
Meta and Alphabet, Google’s parent company, also experienced sharp declines. Nvidia competitors Marvell, Broadcom, Micron, and TSMC saw significant losses, too. Companies like Oracle, Vertiv, Constellation, NuScale, and other energy and data center firms tumbled.
The sell-off dragged down the broader stock market. The tech-heavy Nasdaq plunged by 3.1%, while S&P 500 fell by 1.5%. However, the Dow Jones rose by 289 points, or 0.7%, buoyed by gains in healthcare and consumer companies, which could potentially be impacted by advancements in AI.
Marc Andreessen, a supporter of President Donald Trump and a prominent tech investor, wrote in a post on X that DeepSeek is “one of the most amazing and impressive breakthroughs I’ve ever seen.”
This achievement from the relatively unknown AI startup is particularly striking when given the United States government’s longstanding efforts to limit the export of high-performance AI chips to China due to national security concerns. Despite these restrictions, DeepSeek was able to develop its low-cost model on underpowered AI chips, defying expectations.
Notably, tech stocks weren’t the only ones to suffer on Monday — energy stocks were hit hard, too. DeepSeek’s emergence has upended conventional assumptions about the resources required to develop advanced AI.
Perhaps the anticipated nuclear renaissance, including the revival of America’s Three Mile Island energy plant, may no longer be necessary. It seems that the development of AI may require far less capital, computing power, and energy than previously believed.
