DeepSeek's cost-effective AI model running on less-advanced chips raises questions about the need for expensive hardware, impacting valuations of companies like Nvidia. The news sparked a sell-off in global tech stocks, with Nasdaq and S&P 500 indices experiencing significant losses.
Big Tech shares slump after AI start-up’s model raises questions about need for huge western hardware investment
Nvidia shares tumbled as much as 13 per cent soon after the opening bell Monday, erasing about $465 billion from the company’s market capitalization. That eclipsed the previous record, a 9 per cent drop in September that wiped out about $279 billion in value. “DeepSeek shows that it is possible to develop powerful AI models that cost less,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “It can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers.”
Chinese AI-related stocks reacted positively, with mainland-listed Merit Interactive among those surging by their daily limits. Merit is among those with the clearest links to DeepSeek after stating in an earlier filing that it had incorporated the home-grown AI firm’s model into marketing. In Hong Kong, the Hang Seng Tech Index climbed as much as 2 per cent ahead of Lunar New Year holidays this week.
The decline in Nasdaq futures comes at the start of a big week for earnings from major tech companies including Apple and Microsoft. Profit growth is expected to have slowed while valuations remain inflated, once again causing concern over the large AI-driven rally in the sector.
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