U.S. stocks tumbled Monday after a surprise advancement from Chinese artificial intelligence firm DeepSeek raised concerns over America’s AI dominance. Nvidia (NVDA) suffered a historic decline, losing nearly $600 billion in market value—the largest single-day loss for any stock in history.
DeepSeek’s AI Breakthrough Stuns Markets
DeepSeek, a relatively unknown startup, unveiled its R1 AI model, a ChatGPT competitor, capable of operating at a fraction of the cost of models from OpenAI, Google, and Meta. The company claimed it spent only $5.6 million on computing power for R1—significantly lower than the billions of dollars spent by U.S. firms.
The announcement sent shockwaves through the market, particularly among AI and semiconductor stocks.
Tech Stocks Take a Hit
The Nasdaq plunged 3.1%, while the S&P 500 fell 1.5%. The Dow Jones bucked the trend, rising 289 points, supported by healthcare and consumer stocks.
Among the hardest-hit companies:
- Nvidia (NVDA): down 17%, losing $588.8 billion in market value.
- Meta (META) and Alphabet (GOOGL): both fell sharply.
- Broadcom, Marvell, Micron, and TSMC: all declined.
- Oracle, Vertiv, and energy companies: also saw heavy losses.
AI Investment Concerns
The selloff comes after major U.S. tech firms made aggressive AI investment commitments:
- Meta: pledged to spend up to $65 billion on AI this year.
- OpenAI CEO Sam Altman: projected that AI infrastructure would require trillions in investments.
DeepSeek’s low-cost AI model has raised questions about whether U.S. firms are overspending on AI development.
Wall Street Reacts
Marc Andreessen, a leading tech investor and supporter of Donald Trump, called DeepSeek’s breakthrough “one of the most amazing and impressive” AI developments.
Meanwhile, analysts are debating whether the market reaction is overblown. Michael Block, market strategist at Third Seven Capital, commented:
“Time will tell if the DeepSeek threat is real… Markets may have been looking for an excuse to pull back, and they got a great one here.”
Investors Eye Chinese AI Firms
As U.S. markets reeled, some investors turned their attention to Chinese AI stocks. Charu Chanana, chief investment strategist at Saxo, said:
“DeepSeek’s rise could spark renewed investor interest in undervalued Chinese AI companies, providing an alternative growth story.”
Energy and Crypto Also Fall
With AI data centers consuming vast amounts of electricity, energy stocks had been rising—but the DeepSeek news triggered a sharp reversal:
- Constellation Energy (CEG): fell 21%.
- Vistra (VST): dropped 28%.
- GE Vernova (GEV): declined 21%.
- Natural gas futures: fell 5.9%.
- Oil prices: declined 2%.
Bitcoin and other cryptocurrencies also saw significant losses.
Is the Market Overreacting?
Despite the panic, some analysts caution that one breakthrough may not be enough to disrupt U.S. AI leadership. Giuseppe Sette, president of AI research firm Reflexivity, stated:
“The U.S. remains the most promising home for self-improving AI due to its rich talent and capital base.”
For now, investors are watching closely as U.S. tech companies prepare to report earnings, which could determine the market’s next move.
Conclusion
The DeepSeek shockwave has triggered a massive selloff in U.S. tech stocks, calling into question the sustainability of AI spending. Whether this marks a temporary correction or a deeper shift in AI dominance remains to be seen.
