U.S. technology firms plunged in premarket trading, as Chinese startup DeepSeek sparked concerns over competitiveness in AI and America’s lead in the sector, triggering a global sell-off.
Shares of chip designer Nvidia, a huge beneficiary of the AI hype, were down 9.84% at 05:11 a.m. ET ahead of the market open. Netherlands-based chip companies ASML and ASM International tumbled 10.59% and 14.94% respectively in European trade, while in Asia, Japanese chip-related stocks were broadly lower.
DeepSeek launched a free, open-source large-language model in late December, claiming it was developed in just two months at a cost of under $6 million — a much smaller expense than the one called for by Western counterparts. Last week, the company released a reasoning model that also reportedly outperformed OpenAI’s latest in many third-party tests.
The developments have stoked questions about the amount of money big tech companies have been investing in AI models and data centers.
“DeepSeek clearly doesn’t have access to as much compute as U.S. hyperscalers and somehow managed to develop a model that appears highly competitive,” Srini Pajjuri, semiconductor analyst at Raymond James, said in a note Monday.
— CNBC’s Lee Ying Shan and Michael Bloom contributed to this story.
This breaking news story is being updated.