China’s DeepSeek buzz sparks $1.2 trillion Tech stock drop, challenging US AI giants

Nvidia and other major U.S. tech firms saw a sharp drop on Monday, January 27, amid AI competitiveness concerns. Chinese startup DeepSeek challenged U.S. leadership, leading to an 11% drop in Nvidia’s stock—its worst since March 2020, according to reports.

The market decline also affected other AI-related stocks. Micron and Arm Holdings fell by over 8% and 9%, while Broadcom and AMD lost more than 14% and 5%. AI power infrastructure firms like Constellation Energy and Vistra dropped by 12% and 19%, CNBC reported.

European and Asian chip companies also faced losses. Firms such as ASML and ASM International in Europe and Advantest and Tokyo Electron in Japan saw a significant decline in their stock prices.

DeepSeek, founded by Quant fund chief Liang Wenfeng, has emerged as a strong competitor to OpenAI and Meta. The company launched a free, open-source AI model in December, developed in just two months at a cost of under $6 million.

Its latest AI model, released last week, has topped Apple’s App Store rankings. DeepSeek’s reasoning model reportedly outperformed OpenAI’s latest offerings in several third-party tests. Despite its success, analysts question the claimed development costs and warn against overestimating its potential impact on the AI industry.

Investor Marc Andreessen praised DeepSeek’s progress, calling it a major breakthrough and a “gift to the world.” His comments have raised concerns about whether big tech firms’ AI investments are at risk.

Analyst Srini Pajjuri noted that U.S. tech giants like Amazon and Microsoft need to act quickly to stay ahead. He emphasized that access to powerful GPUs remains an advantage for American companies.

Citi analysts highlighted rising computing costs as a key issue. Despite growing competition, they believe access to advanced chips will help U.S. firms maintain their leadership in AI.

DeepSeek’s rapid rise challenges major AI players, but questions remain about its long-term impact. Analysts emphasize the need for cautious optimism, focusing on sustained innovation and market adaptation to maintain a competitive edge.

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