Shares in major US technology companies tumbled on Monday following the meteoric rise of a Chinese AI chatbot, DeepSeek. The app, developed by Hangzhou-based Liang Wenfeng, launched last week and quickly surpassed rivals like OpenAI’s ChatGPT, becoming the most downloaded free app in the US.
DeepSeek’s sudden success stems from its significantly lower development cost, reportedly just $6 million, compared to the billions spent by competitors. The chatbot runs on the open-source DeepSeek-V3 model, which uses existing technology and freely available software. Despite this, its performance rivals top-tier AI models in tasks such as maths, coding, and natural language reasoning.
This disruptive emergence has unsettled markets. On Monday, Nvidia and Broadcom shares fell 18%, while Microsoft and Google-owner Alphabet saw losses of 2.5% and over 4%, respectively. European tech firms also felt the impact, with Dutch chipmaker ASML dropping 7% and Siemens Energy plunging 20%.
Analysts warn that DeepSeek’s low-cost approach could threaten the profitability of US tech giants, particularly as they plan massive AI infrastructure investments. Last week, President Trump announced a $500 billion initiative to secure America’s AI dominance.
However, challenges remain for Chinese AI firms. US restrictions on advanced chip technology limit their access to critical resources. While DeepSeek utilises a blend of imported and domestic chips, its reliance on alternatives may constrain future advancements.
Amidst its rapid rise, DeepSeek reported being targeted by cyberattacks, prompting temporary registration limits. The company thanked users for their support as it navigates the challenges of global success.
As markets react, DeepSeek’s impact signals a transformative moment in the AI industry, likened to an “AI Sputnik moment” by Silicon Valley experts.