The fast gaining popularity of Chinese AI app DeepSeek has taken the tech sector in the US and other markets by storm. The sharp sell-off in global tech stocks was triggered by concerns over DeepSeek’s lower cost of creating AI tools compared to other US-based AI companies. The Nasdaq 100 lost nearly 3 per cent and the Wall Street favourite Nvidia declined 17 per cent on Monday. What led to a rout in global markets? DeepSeek is a Chinese artificial intelligence company based in Hangzhou, the capital city of the Chinese province Zhejiang. The company was founded by Liang Wenfeng, a hedge fund manager. Earlier this month, the startup released its open source AI platform, which is much more cost-effective than models developed by leading US companies. This led to a concern that DeepSeek may derail the growth story of major tech companies across the world. On Monday, Nasdaq futures slumped and Japanese tech stocks declined, reflecting concerns over Chinese start-up DeepSeek's cost-efficient AI model, which is posing threats to the business models of US tech giants like Nvidia, OpenAI and Google. Nasdaq 100 fell 646.73 points, or 2.97 per cent, to 21,127.28 and S&P 500 plunged 1.46 per cent on Monday. US chipmaker Nvidia Corp stock ended 16.97 per cent at $118.42 per share, losing nearly $600 billion in market value. “DeepSeek's breakthrough in AI model development, leveraging widely available resources, represents a paradigm shift in how artificial intelligence can be created and deployed. This approach directly challenges the narrative of U.S. technological exceptionalism, particularly the dominance of the 'Magnificent Seven' tech giants,” said Devarsh Vakil - Head of Prime Research - HDFC Securities. Such disruption raises concerns for the NASDAQ index, where these companies' outsized market capitalizations, worth trillions of dollars, heavily influence market performance, he said.
