US Stock Market faced a drastic decrease on Monday, erasing over $1 trillion in market capitalisation as traders unshipped technology stocks.
The Chinese AI DeepSeek's disruption has caused a drop in Nvidia's market value overnight. The snowball effect bogged down the S&P 500 and Nasdaq down by 3%. Microsoft, Alphabet, and the Philadelphia Semiconductor Index also fell by 2.1%, 4.2% and 9.2%.
The steep fall is a record in the financial market of the US.
What is DeepSeek?
DeepSeek is a low-priced Chinese Start-up and an AI-powered Chatbot designed to enact a variety of tasks identical to platforms like ChatGPT.
It is developed at a cost comparatively lower than industry leaders, reportedly around $6 Million.
DeepSeek's founder has reportedly built up a collection of Nvidia A100 chips, which have been banned from export to China Since September 2002.
It has become the most downloaded free app on Apple's App Store in the US. Its rapid rise and popularity have also faced notable malicious attacks and temporary service outages.
Is DeepSeek a threat to US AI Players?
The AI startup is majorly owned by Liang Wenfeng, a co-founder of a hedge fund called High-flyer. The company recently gained popularity because its large language models have surpassed those developed by US Tech giants.
The success of DeepSeek may reduce the influence and pricing power of big AI companies like Open AI, Microsoft, and Meta as DeepSeek offers strong performance at a lower price.
The company has also managed to thrive despite limitations on advanced AI Chip export, it raises questions about the effectiveness of US restrictions on Chips.
DeepSeek is a strong competitor in the AI industry, as it delivers high-quality AI models at low prices compared to US Tech giants.
Tech Giants Declined
On January 27, 2025, the US Tech Nasdaq experienced a notable downturn of 3.1% mainly driven by considerable drops in major technology stocks.
Nvidia's shares tumbled nearly 17%, marking a significant loss for the Company. Additionally, companies like Broadcom Inc., Microsoft, and Alphabet saw declines of 17.4%, 2.1%, and 4.2% .
The downturn was also seen in Asia, where Japan's SoftBank Group slumped to 8.3%.