DeepSeek AI Startup causes a drop in U.S. Tech Giants' Stocks!

According to Investopedia, the Chinese startup DeepSeek has put significant pressure on the stocks of major tech and semiconductor companies by releasing a new AI model. This model is capable of functioning with less advanced chips and at a lower cost compared to the advanced models of companies like OpenAI, raising concerns among investors about the overvaluation of U.S. tech stocks.

Major Tech Stocks Plunge

The release of this AI model caused significant declines in the stocks of major companies such as Nvidia and Broadcom.

Nvidia: Down over 16%

Broadcom: Dropped by around 17%

Micron Technology: Declined by approximately 11%

TSMC (Taiwan Semiconductor Manufacturing Company): Fell 13%

ASML Holding (Dutch semiconductor equipment company): Down 6%

Additionally, energy providers for AI data centers, such as Constellation Energy and Vistra, which were previously considered a critical part of the supply chain, each plummeted by more than 20%.

DeepSeek: A Threat to Tech Giants?

DeepSeek has claimed that its new AI model performs on par with ChatGPT while utilizing low-cost technologies and less advanced chips, securing a strong market position. The company's app has even topped the U.S. App Store download charts.

This achievement comes despite U.S. export controls on advanced chips, which had posed a major challenge for Chinese AI firms. However, DeepSeek’s success demonstrates that Chinese companies can still overcome these restrictions.

Analysts’ Response (Reaction) to DeepSeek’s Competition

Despite concerns over DeepSeek’s rising competition, Citi analysts still recommend that investors buy Nvidia stock. They believe that DeepSeek’s success was likely only possible with advanced chips used during the initial training phase.

Analysts also emphasize that the U.S.’s access to cutting-edge chips and top-tier technology remains a major advantage for American companies in the global AI race. This competitive edge could, in the long run, reinforce Nvidia’s position in the market.

Conclusion

The release of DeepSeek’s new AI model signals a shift in the competitive landscape of artificial intelligence. While major tech companies face declining stock values, this competition highlights how startups can pose a serious threat to industry giants. Traders should closely monitor developments in this rapidly evolving sector.