DeepSeek Disrupts U.S. Tech Market: $1 Trillion Wiped Off Stocks in Historic Sell-Off
Launched on January 10, 2025, DeepSeek's AI assistant quickly became the top free app on U.S. iPhones.
The emergence of DeepSeek, a Chinese AI startup, has dramatically disrupted the U.S. tech market, leading to a historic sell-off that erased over $1 trillion in market capitalization from major tech stocks.
This event has been described as a potential “Sputnik moment” for the AI industry, highlighting the competitive threat posed by DeepSeek to established American firms like Nvidia, OpenAI, and Google.
On January 27, 2025, U.S. stocks experienced a significant downturn, with the Nasdaq falling approximately 3%. Nvidia’s shares plummeted nearly 17%, resulting in a staggering loss of around $600 billion in market value, marking the largest single-day loss for any public company in history.
Other tech giants also faced declines, including Broadcom and Microsoft.
Read More: Tech Selloff Intensifies as DeepSeek Disrupts Global AI Landscape
Launched on January 10, 2025, DeepSeek’s AI assistant quickly became the top free app on U.S. iPhones. The company claims to have developed its technology at a fraction of the cost compared to its American counterparts, asserting that it trained its models using significantly fewer high-end Nvidia chips than typically required.
The DeepSeek chatbot gained broader accessibility this year after launching on Apple and Google app stores.
However, panic erupted following a research paper released last week—the same day as President Donald Trump’s inauguration.
The paper detailed DeepSeek’s AI model, R1, which demonstrated advanced “reasoning” abilities, such as re-evaluating its approach to solving math problems. Notably, it was also significantly cheaper than OpenAI’s comparable o1 model.
This revelation triggered a global sell-off in tech stocks.
Analysts remain sceptical about DeepSeek’s claims regarding its low-cost development and the actual resources used.
Read More: White House Assesses National Security Risks of Chinese AI App DeepSeek
Prominent figures in the tech industry have expressed concern over DeepSeek’s rapid rise.
Elon Musk suggested that DeepSeek may possess more Nvidia GPUs than it publicly claims, while Bernstein analyst Stacy Rasgon cautioned against viewing DeepSeek’s advancements as miraculous.
Meanwhile, President Donald Trump labelled DeepSeek’s success a “wake-up call” for U.S. companies.
DeepSeek’s success raises questions about the sustainability of traditional AI development models that rely on massive investments in hardware and data centres. This shift could lead to increased scrutiny of spending practices among U.S. tech giants as they face competition from lower-cost alternatives like DeepSeek.
The unfolding situation suggests that the landscape of AI technology may be on the brink of significant transformation, with potential ramifications for investment strategies and market dynamics in the tech sector.
