Big technology stocks including Nvidia, Microsoft, Meta and Tesla tumbled in premarket trading on concerns that a Chinese artificial intelligence startup could threaten America’s dominance in AI.
Shares of Nvidia plunged nearly 12% on news reports about the capabilities of DeepSeek — a China-based startup which has made waves in the industry after launching a free, open-source large-language model in December.
DeepSeek was reportedly developed in just two months at a cost of under $6 million — a stark contrast to the billions of dollars typically spent by Western tech giants on AI research and infrastructure.
The developments triggered a global sell-off, particularly impacting semiconductor firms, as fears mounted over the sustainability of US dominance in the sector.
Shares of Nvidia, a key player in AI-driven chip design and a significant beneficiary of the AI boom, plummeted 11.8% as of 07:05 a.m. Eastern Time before the market opened on Monday.
Microsoft, which has plowed billions of dollars into Sam Altman’s OpenAI, the company behind ChatGPT, was off 4.1% in premarket trading. Shares of Meta were off 1.7% while Tesla saw its share price drop by more than 2.7% in pre-market trading.
European chipmakers also faced sharp declines, with Netherlands-based ASML and ASM International falling 8.9% and 13.6%, respectively.
Meanwhile, Nasdaq futures have tumbled 2.3%, S&P 500 futures have declined 1.3% and Dow Jones Industrial Average futures have decreased by 0.9% before the opening bell on Monday.
The rapid progress of DeepSeek has sparked scrutiny over the immense sums being funneled into AI research by leading US firms, raising questions about efficiency and cost-effectiveness.
“DeepSeek clearly doesn’t have access to as much compute as US hyperscalers and somehow managed to develop a model that appears highly competitive,” said Srini Pajjuri, a semiconductor analyst at Raymond James, in a note on Monday.
Meanwhile, analysts at Citi recognize that DeepSeek’s technological strides have raised investor questions about the cost of computational power.
However, they emphasize that American companies still maintain a significant advantage due to their access to the most sophisticated chips.
“While the dominance of US companies in the most advanced AI models could be potentially challenged, their access to high-end GPUs remains a key differentiator,” Citi analysts stated in a note.
The market turbulence coincides with a broader push by the US government to reinforce AI leadership.
President Trump recently announced a $500 billion AI initiative known as Stargate.
The vast sum of money being invested in the project, which includes the involvement of top firms such as OpenAI, Oracle and SoftBank, underscores the strategic importance of advanced chips in maintaining American competitiveness in AI development.
