A Chinese AI company's rapid development of an open-source model has sent shockwaves through the global stock market, raising concerns about China's growing dominance in artificial intelligence.
DeepSeek, a Chinese artificial intelligence company, sent shockwaves through the global tech market in December by releasing an open-source AI model. The company claimed to have developed the model in just two months and for less than \$6 million, a stark contrast to the billions of dollars invested by American tech giants like OpenAI, Microsoft , and Meta. These claims sparked fears that China might be surpassing the US in the efficiency and scale of its AI investments.
The news triggered a major sell-off in the US stock market, with the Nasdaq Composite plunging over 3%, the Dow Jones Industrial Average falling by less than a point, and the S&P 500 tumbling almost 2%. Nvidia, a leading semiconductor manufacturer heavily invested in AI, was among the hardest hit, with its shares plummeting as much as 18%. This drop wiped out over \$500 billion in market value, potentially marking the biggest single-day decline in US stock market history. Other mega-cap tech firms also experienced significant losses, including Microsoft and Alphabet (Google's parent company), which fell 4%, and Meta Platforms, which dropped almost 2%.Despite ongoing export controls restricting advanced semiconductor sales to China, DeepSeek's rapid advancements have raised concerns about the country's AI capabilities. Microsoft CEO Satya Nadella acknowledged the significance of DeepSeek's progress, stating that it was “super impressive... and super-compute efficient” at the World Economic Forum last week. He emphasized the need to take these developments seriously. Concerns about DeepSeek's impact extended beyond tech giants, affecting companies involved in the energy sector. Constellation Energy, which partnered with Microsoft to power AI servers at the Three Mile Island nuclear plant, plunged 16%. Other power companies seen as beneficiaries of the AI boom, such as Vistra Energy and NRG Energy, also experienced sharp declines. Siemens Energy, a manufacturer of equipment for utility companies, plummeted 20%, and GE Vernova, another power equipment maker, fell over 23%
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