Nasdaq slumps on Chinese AI upstart, Nvidia loses some $400 bn in value

The tech-rich Nasdaq tumbled early Monday as traders around Wall Street and other global bourses reacted to the emergence of a low-cost Chinese generative AI venture that has apparently overtaken US companies.

DeepSeek, which was developed by a start-up based in the eastern Chinese city of Hangzhou, has shown the ability to match the capacity of AI pace-setters such as Nvidia, which sank more than 11 percent Monday, giving up some $400 billion in market value.

The tech-rich Nasdaq led major indices lower, falling 2.7 percent, with AI players Meta, Microsoft and Google parent Alphabet all firmly lower.

DeepSeek said they spent only $5.6 million developing their model—peanuts when compared with the billions US tech giants have poured into AI.

US “tech dominance is being challenged by China,” said Kathleen Brooks, research director at XTB. “The focus is now on whether China can do it better, quicker and more cost effectively than the US, and if they could win the AI race.”

Meta and Microsoft are among the tech giants scheduled to report earnings later this week, offering opportunity for comment on the emergence of the Chinese company, likened by venture capitalist Marc Andreessen to a “Sputnik moment,” when the Soviet Union shocked Washington with its 1957 launch of a satellite into orbit.

“DeepSeek’s AI assistant is now the top-rated free application on Apple’s US App Store,” said a note from David Morrison, senior market analyst at FCA.

“Investors have been forced to reconsider the outlook for capital expenditure and valuations given the threat of discount Chinese AI models. These appear to be as good, if not better, than US versions.”

© 2025 AFP