A Chinese artificial intelligence company's breakthrough innovation sends shockwaves through global financial markets.
According to Daily Mail, DeepSeek's demonstration of a cost-effective chatbot rivaling OpenAI and Google's technology sparked a massive trillion-dollar tech stock selloff, causing major Wall Street indexes to plunge dramatically on Monday morning.
The S&P 500 opened 1.7 percent lower, while the tech-heavy Nasdaq experienced a steeper decline of over 3 percent. This market turbulence emerged after DeepSeek showcased its revolutionary AI capabilities, challenging the dominance of established American tech giants.
Nvidia, the prominent chipmaker that has been riding the AI wave for the past year and a half, bore the brunt of the market reaction. The company's stock plummeted by 13 percent at market opening, resulting in an unprecedented $465 billion erosion in market value, marking the largest single-day market rout in history.
Other major tech companies faced similar downward pressure. Broadcom's stock fell approximately 12 percent, while Oracle experienced an 8 percent decline. Industry giants Microsoft and Amazon saw their shares drop by 3.5 percent and 0.24 percent, respectively, within the first hour of trading.
The impact extended beyond U.S. borders, affecting European and Asian markets. The Stoxx Europe 600 declined by 0.4 percent, while Germany's DAX and France's CAC 40 experienced significant drops of 1.1 percent and 0.8 percent, respectively.
eToro US Investment Analyst Bret Kenwell offered his perspective:
Mondays are typically quiet for stocks when markets are at all-time highs, but not today. The AI space can and will continue to evolve, and like we're seeing today, sometimes those developments will come along quickly. That said, panicking rarely makes for a good investment decision.
The market upheaval follows recent warnings from JPMorgan Chase CEO Jamie Dimon about inflated asset prices. At the World Economic Forum in Davos, Switzerland, Dimon cautioned that current market valuations rank within the top 10 to 15 percent of historical levels.
DeepSeek's free AI Assistant, which reportedly operates more efficiently using fewer Nvidia chips, has quickly gained prominence.
The application surpassed ChatGPT to become the most downloaded free app on the U.S. Apple Store on Monday, raising questions about America's continued leadership in AI technology development.
The tech sector's dramatic decline represents a pivotal moment in the ongoing global AI race. DeepSeek's emergence as a formidable competitor has forced investors to reassess their positions in U.S. technology stocks, particularly those heavily invested in AI development.
The ripple effects have reached international markets, impacting prominent European chip companies. Netherlands-based ASML and ASM experienced significant declines of 8 percent and 12 percent, respectively, while Japanese chip-related stocks, including Advantest and Tokyo Electron, also recorded losses.
This market correction occurs against the backdrop of unprecedented growth in U.S. stock markets, which achieved consecutive annual gains exceeding 20 percent in both 2023 and 2024, a feat not seen since the late 1990s
