DeepSeek Overnight Shakes Up U.S. Tech Stocks, NVIDIA Plummets 13% in Pre-Market, Losing Over $300 Billion in Market Value
On January 27, as China was about to welcome the Lunar New Year, the “phenomenal” rise of Chinese AI startup DeepSeek “upended” U.S. tech stocks, sparking doubts about America’s technological dominance.
In pre-market trading that day, NVIDIA’s stock price plummeted by over 12%, with its market value expected to shrink by more than $300 billion. Meanwhile, Microsoft, Google, Meta, and Amazon saw their stock prices drop between 4% and 6%, potentially wiping out a combined trillion dollars in market value from major U.S. tech companies. Over the next week, tech giants including Meta, Microsoft, and Apple are set to release their earnings reports.
In recent years, tech giants like Microsoft, Google, Meta, Amazon, and Tesla have been ramping up investments in artificial intelligence. These companies are projected to collectively invest around $200 billion in AI by 2025, with the majority of funds directed toward building data centers.
The continuous investment in AI has also been driving the valuations of these companies. However, DeepSeek is disrupting the current AI market landscape with its low-cost approach, causing panic in the capital markets and signaling a potential revaluation of AI-focused tech companies in the future.
“The rapid rise of DeepSeek shows that it is possible to develop powerful AI models at a lower cost,” said Vey-Sern Ling, Managing Director at Union Bancaire Privée. “This could disrupt the investment dynamics across the entire AI supply chain, which is currently driven by the massive spending of a few hyperscale companies.”
Nirgunan Tiruchelvam, Head of Consumer and Internet Research at Aletheia Capital in Singapore, noted that Silicon Valley’s massive capital and operational expenditures were once seen as the most appropriate way to address the AI trend. However, DeepSeek’s products “severely defy this logic,” raising doubts about whether the vast resources poured into AI are justified.
Notably, DeepSeek’s models are built using easily accessible open-source technologies. This has sparked skepticism about the long-held view that the U.S. holds a multi-year lead over China in AI technology.
“While companies like NVIDIA currently hold the technological high ground, DeepSeek’s rise reminds us that dominance in AI is far from decided,” said Charu Chanana, Chief Investment Strategist at Saxo Markets. “Competition is intensifying, and while DeepSeek may not pose a significant threat now, it shows that future competitors will develop faster and challenge established tech giants more quickly. This week’s tech earnings will be a major test.”
Source: dailynewspapers.in