Major technology and artificial-intelligence (AI) stocks tumbled on Monday as news broke that China’s DeepSeek has developed a large language model said to rival those from United States tech giants—at a fraction of the cost.
By midday trading, the S&P 500 had fallen 1.7 percent, on course for its worst session in more than a month, while the Nasdaq Composite was down 2.8 percent. Leading the downturn were Big Tech powerhouses like Nvidia, whose shares sank 14.4 percent.
Meanwhile, stocks outside the AI-heavy technology sector fared notably better. The Dow Jones Industrial Average—a benchmark less reliant on tech companies—was down only 0.1 percent at midday in New York, after briefly edging into positive territory earlier.
DeepSeek’s Rapid Rise
Investor sentiment took a blow after DeepSeek, a Chinese company, announced its new R1 large language model, claiming it could match or surpass American competitors. DeepSeek’s app quickly shot to the top of Apple’s App Store in the early hours of Monday—a feat analysts say is especially striking given the constraints the U.S. government has placed on China’s access to high-end AI chips.
Silicon Valley venture capitalist Marc Andreessen described DeepSeek’s R1 model as AI’s “Sputnik moment,” recalling the 1957 Soviet satellite launch that jolted the United States into the space race. Andreessen went on to call the R1 release “one of the most amazing and impressive breakthroughs I’ve ever seen,” saying that its open-source nature amounts to “a profound gift to the world.”
Skepticism Persists
Despite the excitement, many analysts caution that uncertainty remains about DeepSeek’s actual capabilities—particularly regarding how it may have circumvented chip restrictions. Dan Ives of Wedbush Securities noted that “it remains to be seen if DeepSeek found a way to work around these chip restriction rules and what chips they ultimately used,” adding that there will be “many skeptics” given the limited information and China’s role as the source.
Ripple Effect Across Global Markets
The reverberations were felt worldwide. Dutch chip equipment maker ASML slid 6.6 percent in Amsterdam, while Tokyo-listed SoftBank Group Corp dropped 8.3 percent—retreating closer to levels before a U.S.-backed partnership announcement to invest up to $500 billion in AI infrastructure.
On Wall Street, shares of Constellation Energy fell 19 percent. The company recently announced plans to restart the shuttered Three Mile Island nuclear power plant to power Microsoft data centers, a move widely tied to the booming AI sector.
With markets rattled by the prospect of a new major AI player, investors remain on edge, watching for further developments that may redefine the rapidly expanding field of artificial intelligence.
