US tech giant Nvidia lost over a sixth of its value after the unexpected surge in popularity of the Chinese artificial intelligence (AI) chatbot, DeepSeek, sent shockwaves through investors in the US and Europe.
DeepSeek’s Meteoric Rise in the US
Launched last week, DeepSeek has already become the most downloaded free app in the US, attracting attention due to its reported development at a fraction of the cost of its competitors.
AI chip leader Nvidia, along with tech giants Microsoft and Google, saw significant declines in market value on Monday in response to DeepSeek’s sudden success. Nvidia shares dropped by 16.9%, while rival Broadcom fell 17.4%. Microsoft shares slid 2.14%, and Alphabet, Google’s parent company, lost over 4%.
DeepSeek Limits Registrations Amid Cyberattacks
On Monday, DeepSeek announced it would temporarily limit user registrations due to “large-scale malicious attacks” on its software. The company assured existing users that services remain unaffected.
A Disruptive New AI Model
Powered by the open-source DeepSeek-V3 model, the chatbot is said to have been developed for approximately $6 million—significantly less than the billions spent by its rivals. DeepSeek researchers attribute their cost efficiency to leveraging existing technologies and open-source software, which can be freely used and modified.
This innovative approach has raised concerns about the future of American dominance in AI and the massive investments made by US firms. OpenAI recently pledged $500 billion (£400 billion) alongside other firms to develop AI infrastructure in the US.
President Donald Trump lauded the investment as “the largest AI infrastructure project by far in history” and a key step in keeping “the future of technology” rooted in the US.
Chinese AI’s Cost-Efficient Breakthrough
DeepSeek’s emergence underscores a significant shift in the AI industry. With restrictions on advanced chip technology imports, Chinese developers have turned to resource-sharing and innovative techniques, enabling them to create high-performing AI models requiring less computing power and lower costs.
DeepSeek-R1, launched earlier this month, boasts performance comparable to OpenAI’s latest models for tasks like coding, math, and natural language processing.
Venture capitalist and Trump adviser Marc Andreessen described DeepSeek-R1 as “AI’s Sputnik moment,” referencing the Soviet Union’s surprise launch of the Sputnik satellite in 1957.
Global Stock Markets React
DeepSeek’s popularity has rattled global stock markets. In Europe, Dutch chip equipment maker ASML saw its shares drop by over 7%, while Siemens Energy’s stock plunged 20%.
“This idea of a low-cost Chinese version hasn’t necessarily been forefront, so it’s taken the market a little bit by surprise,” said Fiona Cincotta, senior market analyst at City Index.
Singapore-based technology equity adviser Vey-Sern Ling cautioned that DeepSeek’s rise could “potentially derail the investment case for the entire AI supply chain.”
However, a Citi report highlighted that US companies could maintain their edge in an increasingly restrictive environment due to superior access to advanced chips.
Who Founded DeepSeek?
DeepSeek was founded in 2023 by Liang Wenfeng in Hangzhou, China. Liang, a graduate in information and electronic engineering, also founded the hedge fund that financed DeepSeek.
Reportedly, Liang stockpiled Nvidia A100 chips—now banned from export to China—and paired them with lower-end chips still available for import. Some estimates suggest he amassed a collection of 50,000 chips, enabling the cost-effective development of DeepSeek.
In a July 2024 interview with The China Academy, Liang reflected on the model’s unexpected reception:
“We didn’t expect pricing to be such a sensitive issue. We were simply following our own pace, calculating costs, and setting prices accordingly.”
“We didn’t expect pricing to be such a sensitive issue,” he said.
“We were simply following our own pace, calculating costs, and setting prices accordingly.”
