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DeepSeek's AI Debut Sparks $1 Trillion US Tech Sell-Off; Nvidia Shares Plunge 18%

Jan 27, 2025, 03:39 PM

Chinese AI startup DeepSeek has released its latest AI model, R1, which is shaking up the global tech industry. Developed in just two months for under $6 million by a team of 200 people, DeepSeek's R1 is reportedly performing on par with leading AI models from US companies like OpenAI while running on less-advanced chips. The emergence of DeepSeek's cost-effective AI model has raised concerns about the US's ability to maintain its technological dominance in artificial intelligence, sparking fears of a 'Sputnik moment'. As a result, shares of major US tech companies, including Nvidia, Microsoft, and Meta, have plummeted. Nvidia's stock dropped as much as 18%, its biggest decline since 2020, erasing up to $730 billion in market capitalization and pushing its market cap below $3 trillion. The Nasdaq index fell over 3%, with US tech stocks on track to lose up to $1.2 trillion in value. DeepSeek's app has also become the top free app on Apple's App Store, overtaking OpenAI's ChatGPT. Investors are reassessing the valuations of US tech giants amid fears that China is gaining ground in the AI race.