US Stocks Plunge as Chinese AI Breakthrough Shakes Tech Sector

TDT | Manama
Email : editor@newsofbahrain.com

U.S. stocks took a sharp dive on Monday, with chipmaker Nvidia losing nearly $600 billion in market value, following a surprising technological breakthrough from Chinese artificial intelligence startup DeepSeek. The development has cast doubt on the perceived dominance of the American tech industry.

DeepSeek, a relatively unknown one-year-old startup, unveiled its ChatGPT-like AI model, R1, last week. Unlike the models developed by OpenAI, Google, or Meta, R1 operates at a significantly lower cost. The company disclosed that it spent just $5.6 million on computing power for its base model—an astonishing contrast to the hundreds of millions or even billions of dollars invested by major U.S. tech firms in their AI initiatives.

The revelation sent shockwaves through global markets, particularly within the tech sector. The Nasdaq, heavily weighted toward technology stocks, plummeted by 3.1%, while the broader S&P 500 declined by 1.5%. Meanwhile, the Dow Jones Industrial Average, buoyed by gains in healthcare and consumer stocks less affected by AI advancements, managed a 0.7% rise, gaining 289 points. Losses were more pronounced earlier in the trading session before a partial recovery.

The news comes as U.S. tech giants ramp up their AI investments. Meta recently announced plans to spend over $65 billion this year on AI development, while OpenAI CEO Sam Altman previously estimated that the industry would require trillions of dollars in infrastructure to sustain the power-hungry data centers driving AI models.

Marc Andreessen, a prominent Silicon Valley investor and supporter of former President Donald Trump, described DeepSeek’s progress as “one of the most amazing and impressive breakthroughs I’ve ever seen” in a post on X (formerly Twitter).

DeepSeek’s success is particularly striking given ongoing U.S. efforts to restrict China’s access to high-performance AI chips over national security concerns. Despite these limitations, the Chinese startup achieved its milestone using lower-powered AI chips, challenging assumptions about the necessity of cutting-edge hardware for AI innovation.

As the global AI race intensifies, DeepSeek’s disruptive emergence signals a potential shift in the balance of power—one that could have lasting implications for the U.S. tech industry and global markets alike.