Chinese artificial intelligence (AI) startup DeepSeek on Monday led to slump in technology shares across the world. Its free open-source AI model, DeepSeek-R1, shook investors’ faith in the AI sector’s demand for high-tech chips.
According to a Reuters report, Nasdaq was 3.1 per cent down after the open, while S&P 500 slid by 1.85 per cent.
Leading chipmaker Nvidia saw its shares drop by 11 per cent in early trading. It led the losses among heavyweight tech stocks that had powered Wall Street’s main indexes to record levels. Microsoft shares tumbled 3.8%, Meta Platforms 3.1% and Alphabet 3.3%, the Reuters report added.
DeepSeek overtook US rival ChatGPT in terms of Apple Store downloads, offers the prospect of a viable, cheaper AI alternative, raising questions on the heavy spending by Apple and Microsoft, amid growing investor push for returns.
How European tech stocks fared
According to the Reuters report, European tech stocks slid about 4%, set for their worst day since October. Chip maker ASML was down 8.9%, and Siemens Energy, which provides electric hardware for AI infrastructure, slid around 20%.
Japan’s Nikkei shed nearly 1%, weighed on by heavyweight tech names. AI-focused startup investor SoftBank Group fell over 8%.
What market experts said
Brian Jacobsen, chief economist at Wisconsin’s Annex Wealth Management, told Reuters,”If it’s true that DeepSeek is the proverbial ‘better mousetrap,’ that could disrupt the entire AI narrative that has helped drive the markets over the last two years. It could mean less demand for chips, less need for a massive buildout of power production to fuel the models, and less need for large-scale data centers.
“However, it could also mean that AI becomes more accessible and help kickstart the development of a wide array of useful applications,” Jacobsen added.
“There is a high level of concentration in equity markets on certain stocks, unprecedented in nature, so that could pose some market-driven risks and that will support bonds for now,” Ella Hoxha, head of fixed income at Newton Investment Management, was quoted by Bloomberg as saying.
(With Reuters, Bloomberg inputs)
