A jolt of panic hit big tech stocks on Monday, with investors rattled by fears that advances in artificial intelligence by Chinese-language startups could threaten the money-making power of tech giants in the U.S., Europe and elsewhere. I was doing it.
Nvidia was one of the hardest hit, plummeting 16%. This is a move that erased hundreds of billions of dollars in market value in one stroke.
Chinese AI company Deepseek has made waves by matching the power of cutting-edge chatbots while using a fraction of the specialized computer chips that make AI companies dependent on larger mainstream companies. This leaves investors with the difficult valuations of companies like NVIDIA, whose equipment is equipped with the most advanced AI systems, and what companies like Google, Meta, and Openai are doing to build their AI businesses. This has led us to reconsider the massive returns implied by the huge investments we make.
US markets tumbled, with the S&P 500 down nearly 2% and the tech-heavy Nasdaq down about 3%. Tech stocks also dented market indexes in Europe and Japan.
The pain was concentrated on companies at the forefront of the AI boom, including the multi-billion dollar behemoth that drove the largest consecutive annual profits in the US market since the 1990s. Investors are worried about whether the rally has gone too far, revealing little room for error for the small group of tech companies that currently dominate the market.
For those waiting for something to shake their faith in high-tech valuations, DeepSeek will help investors understand how they think about AI, according to Steve Sosnick, chief strategist at Interactive Brokers. It could be the beginning of a new phase of what you are thinking about. He called it a “huge slap in the face” for investors who could reset the way they calculate risk.
In addition to Nvidia, other chipmakers such as ARM, Broadcom, Micron, and semiconductor equipment specialists like ASML recorded significant declines.
Deepseek announced its new system last month, but it caught the attention of the tech world late last week. “Competition in the global AI arena is heating up, and this serves as a reminder that Nvidia may not be in pole position forever,” said Charu Chanana, chief investment strategist at Saxo Bank. states.
Deepseek's chatbot rose to become the most downloaded free app on Apple's App Store in the US on Monday, overtaking Openai's ChatGpt. Deepseek has temporarily restricted new registrations in response to what it described as a “large scale malicious attack” on its service.
Shares of Google's Parent Alphabet and Microsoft, bet heavily on AI, fell 3% on Monday. Oracle, a joint venture partner with Openai and Softbank at last week's event with President Trump, fell 13%. Softbank shed more than 8% during trading in Tokyo.
(The New York Times is suing Openai and its partner Microsoft, alleging copyright infringement of news content related to its AI systems. The two tech companies have denied the lawsuit's allegations.)
Some tech giants are bucking the trend. Meta, which last week announced a big jump in its data center spending plans, wobbled in early trading before posting a small profit. Apple, a relative latecomer to the AI Arms Race, rose more than 3%.
The US tech sector as a whole has gotten off to a rocky start, losing about 4% of its value, while all other major sectors have gained over the same period. Because of the size and influence of the technology industry, this weighs in relative to the S&P 500 index, which is growing by about 2% annually.
Recent upheavals cast a cloud over tech giants as Meta, Microsoft and others prepare to introduce their latest quarterly earnings this week. By looking at past bumper profits in the past, analysts were able to inform executives about the company's future financial prospects under stiffer global competition.
“The market is understandably concerned about the increased demand for computing power,” Jefferies analysts wrote in a note. Deepseek's apparent breakthroughs in cost and efficiency “may prompt investors to ask tough questions” about heavy investments in chips and data centers, they added.
The disruption also hit the inventories of utility companies, which opened new business lines to service data centers' voracious power needs. Constellation Energy plunged nearly 20%, partially reversing a long rally that saw the power producer's shares more than double over the past 12 months.
U.S. Treasury yields fell sharply, as they often do when investors seek shelter during turbulent times. Yields move inversely to the price of debt. So the value of the Treasury jumped on Monday.
That overwhelmed the dollar's value, and it slipped into the basket of currencies of the United States' major trading partners. Those moves waned somewhat as investors refocused on this week's meeting of Federal Reserve officials.
Trump has promised to accelerate production of American-made AI to compete with China for global leadership in technology. Last week, he signed an executive order aimed at “removing barriers” to the development of artificial intelligence. As the US government works to maintain the country's lead in the AI race, it is seeking to limit the number of powerful chips like those made by Nvidia that can be sold to China and other rivals.
Bernstein analysts acknowledged the potential of Deepseek's system, but noted that “the initial reaction does not include panic.” Computing power freed up by more efficient AI systems will be absorbed by rapidly growing demand, they say.
Daniel Kay, Joe Rennison and sheila frenkel Contributed report.
