U.S. technology stocks are plunging to begin the trading week on concerns over Chinese artificial intelligence (A.I.) start-up DeepSeek, with Nvidia (NVDA) leading the securities lower.
The stock of chipmaker Nvidia is down 10% in premarket trading as concerns rise over U.S. firms’ competitiveness in A.I. and the U.S. lead in the red-hot sector.
Nvidia’s stock was down as much as 14% in premarket trading before recovering slightly. Other chip stocks associated with A.I. are also down sharply, with the Dutch microchip designer ASML (ASML) down 10% in European trading.
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 U.S.
The small expense involved in launching DeepSeek has investors worried about the billions of dollars being spent by American technology companies to develop similar A.I. models.
Last week, DeepSeek released an A.I. reasoning model that reportedly outperformed OpenAI’s latest chatbot in multiple tests.
The developments have raised questions about the money big tech companies such as Nvidia, Microsoft (MSFT), and Alphabet (GOOGL) have been investing in A.I. models and data centres.
In a note to clients, analysts at Citigroup (C) said that DeepSeek’s large-language model had “prompted investor inquiries around cost of compute.”
Analysts at Wall Street investment firm Bernstein doubted that DeepSeek was actually built for the purported $6 million U.S. and said that the market reaction was “overblown.”
The selloff comes as several major U.S. technology companies are scheduled to report their fourth-quarter 2024 financial results in coming days, including Microsoft and Apple (AAPL).
Prior to today (Jan. 27), Nvidia’s stock had risen 128% over that last 12 months and was trading at $142.62 U.S. per share.
