A Chinese artificial intelligence startup’s latest AI model spooked markets Monday, leaving U.S. and European technology stocks on track for a $1 trillion wipeout, just a week after President Donald Trump threw his weight behind a $500 billion private sector investment in AI infrastructure.
DeepSeek’s latest AI model topped Apple’s App Store charts over the weekend, challenging the dominance of Silicon Valley giants like ChatGPT maker OpenAI. The model’s emergence raised concerns that some of America’s largest publicly traded companies are overvalued.
The model, developed for less than $6 million, prompted doubts about the hundreds of billions Sundar Pichai-led Alphabet, Mark Zuckerberg’s Meta, and Satya Nadella-led Microsoft are planning to spend on developing the technology.
DeepSeek’s Open-Source Model and Reduced Computing Power
DeepSeek’s model is open-source, allowing anyone to access, use, and modify its source code. Due to U.S. sanctions restricting access to advanced semiconductor chips, Chinese researchers have managed to develop AI models that require far less computing power compared to their U.S. counterparts.
Marc Andreessen, a tech entrepreneur who advises Trump, tweeted that DeepSeek’s new model was “AI’s Sputnik moment,” referring to the 1957 launch of the Soviet Union’s artificial Earth satellite, which took the U.S. by surprise and sparked the space race.
The ripple effects of DeepSeek’s surprise move were felt acutely in European and U.S. stock markets. California-based chip producer Nvidia, which saw its market cap soar amid AI enthusiasm, fell 14 percent in mid-morning trading Monday, wiping out over $300 billion in market value.
Nasdaq 100 futures, which speculate on the future value of the technology-heavy index, dropped nearly 4 percent in overnight trading. Europe’s STOXX 600 technology index followed suit, falling nearly 4 percent, with a combined $1.2 trillion rout in sight if losses continue through the day.
Trump’s AI Megadeal Faces Market Skepticism
Just a week ago, President Trump celebrated a $500 billion AI pact involving OpenAI, Oracle, and Softbank, hailing it as a “resounding declaration of confidence in America’s potential under a new president.” However, markets showed skepticism on Monday, with Softbank’s Tokyo-listed shares falling 8.3 percent and Oracle shares dropping 8 percent in New York.
The market correction reflects caution issued by prominent Wall Street figures, such as JP Morgan CEO Jamie Dimon and Goldman Sachs CEO David Solomon, who have warned that U.S. stock markets may be overvalued after two years of substantial growth.
DeepSeek’s new model has been assessed as on par with OpenAI and Meta’s latest offerings, with Andreessen calling it “one of the most amazing and impressive breakthroughs.” This week will be a major test for blue-chip tech companies as they report their latest earnings. On Wednesday, Meta, Microsoft, Tesla, and IBM will reveal their results, followed by Apple and Intel on Thursday.
The Federal Reserve’s first rate decision under Trump is also set for Wednesday, adding more pressure to an already volatile market.
What The Author Thinks
DeepSeek’s disruptive model should serve as a wake-up call for U.S. tech giants who have become complacent in their dominance. While the Chinese startup’s approach is cost-efficient, it also emphasizes the global nature of technological competition. The U.S. cannot afford to rest on its laurels when other countries, even under sanctions, are innovating rapidly. This shake-up is a stark reminder that the future of AI may not solely be shaped by Silicon Valley.
