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Tech Titans Tumble as Chinese AI Upstart Sparks Market Mayhem



In a seismic shift that sent shockwaves through global markets, tech stocks plummeted on Monday as investors grappled with the emergence of a game-changing Chinese artificial intelligence model. The upheaval wiped out an unprecedented $593 billion from Nvidia's market value, marking the largest single-day loss for any company in Wall Street history.

 

The catalyst for this tech tremor? A formidable new player in the AI arena: DeepSeek. This Chinese start-up unleashed a free AI assistant last week, boasting superior efficiency and dramatically lower costs compared to established services like OpenAi. By Monday, DeepSeek had dethroned U.S. rival ChatGPT as the most downloaded app on Apple's App Store, igniting fears of a potential paradigm shift in the AI landscape.

 

As the dust settled on this tumultuous trading day, the tech-heavy Nasdaq found itself battered, closing down 3.1%. Nvidia bore the brunt of the selloff, its shares plummeting nearly 17% and shattering previous records for market capitalisation losses on Wall Street.

 

The carnage wasn't limited to Nvidia alone. Other tech behemoths felt the sting, with Broadcom Inc. plunging 17.4%, Microsoft shedding 2.1%, and Google parent Alphabet closing down 4.2%. The Philadelphia semiconductor index experienced its steepest decline since the pandemic-induced turmoil of March 2020, nosediving 9.2%.

 

This tech tempest wasn't confined to U.S. shores. Asian markets kicked off the global selloff, with Japan's SoftBank Group tumbling 8.3%. The contagion spread to Europe, where Dutch chip equipment manufacturer ASML saw its shares plummet 7%.

 

Brian Jacobsen, chief economist at Annex Wealth Management, offered a sobering perspective on the day's events: "If it's true that DeepSeek is the proverbial 'better mousetrap,' that could disrupt the entire AI narrative that has helped drive the markets over the last two years. It could mean less demand for chips, less need for a massive build-out of power production to fuel the models, and less need for large-scale data centres."

 

The DeepSeek revelation comes on the heels of President Donald Trump's recent announcement of a $500 billion private-sector investment in AI infrastructure through the Stargate joint venture. This initiative, backed by heavyweights like ChatGPT developer OpenAI and Oracle, had initially fuelled a rally in AI-related stocks. However, the tide turned swiftly as investors reassessed the competitive landscape in light of DeepSeek's emergence.

 

Trump himself weighed in on the DeepSeek phenomenon, characterising it as a "wakeup call" that could potentially yield positive outcomes.

 

As investors sought refuge from the tech storm, safe-haven assets saw increased demand. The benchmark U.S. Treasury 10-year yield retreated to 4.53%, while the Japanese yen and Swiss franc strengthened against the U.S. dollar.

 

DeepSeek's sudden rise to prominence marks a significant shift in the perception of Chinese AI capabilities. Previous attempts by Chinese firms to match U.S. AI prowess had fallen short, but DeepSeek's models have garnered praise from Silicon Valley luminaries for their quality and cost-efficiency.

 

Marc Andreessen, the renowned venture capitalist, likened DeepSeek's R1 model to a "Sputnik moment" for AI, drawing parallels to the Soviet Union's satellite launch that kick-started the space race. "DeepSeek R1 is one of the most amazing and impressive breakthroughs I've ever seen — and as open source, a profound gift to the world," Andreessen declared.

 

Despite the market turmoil, some analysts view the selloff as an overreaction. Daniel Morgan, senior portfolio manager at Synovus Trust Company, which holds a substantial position in Nvidia, argues that DeepSeek's mobile and PC-focused AI model primarily competes with consumer-facing applications rather than data centre chips. "The real money in AI is providing the chips for the data centres from the likes of (Nvidia), Advanced Micro Devices and Broadcom," Morgan asserted. "Overall, I view the AI tech selloff today as an opportunity to add high-quality tech shares on weakness."

 

The DeepSeek revelation has not only reshaped market dynamics but also reignited the global race for AI supremacy. Whether this proves to be a temporary setback or a fundamental shift in the AI landscape remains to be seen.

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