Global Tech Stocks Plummet as Chinese AI Breakthrough Shakes Investor Confidence
A groundbreaking artificial intelligence model from Chinese startup DeepSeek has sent shockwaves through the global tech industry, causing a sharp decline in tech stocks worldwide. The innovative model, which reportedly uses lower-cost chips and less data, has raised questions about the dominance of US tech giants like Nvidia Corp.
Market Reaction
Nasdaq futures fell over 3%, while S&P 500 futures tumbled nearly 2%. Nvidia’s stock price plummeted 8.4%, leading declines among heavyweight megacap stocks in premarket trading. Microsoft, Meta Platforms, and Alphabet also saw significant losses, with European tech stocks sliding over 5%.
Expert Insights
Jon Withaar, senior portfolio manager at Pictet Asset Management, noted that if DeepSeek’s claims are true, it could be a game-changer for AI end users. “Anything that makes AI cheaper to implement is positive for those selling AI-related products and applications,” he said. However, he also cautioned that the devil is in the detail, and a Chinese model may be controversial for many uses.
Daniel Tan, portfolio manager at Grasshopper Asset Management, attributed the selloff to high valuations based on P/E and P/B ratios. “The market is expecting future earnings to continue to justify the high prices of these tech names,” he said.
Innovation and Competition
Richard Clode, tech portfolio manager at Janus Henderson Investors, praised DeepSeek’s innovation, saying it brings genuine innovation to the architecture of general-purpose and reasoning models. Alexandr Wang, CEO of Scale AI, tweeted that DeepSeek is a wake-up call for America, emphasizing the need to out-innovate and tighten export controls on chips.
Impact on the AI Industry
George Lagarias, investment strategist at Forvis Mazars, noted that DeepSeek’s breakthrough raises questions about the narrative underpinning the whole market. Ben Barringer, technology analyst at Quilter Cheviot, said the success of DeepSeek will intensify the US/China AI war and provide a wake-up call on the level of CapEx required to build AI models.
As the dust settles, one thing is clear: the AI landscape has changed, and investors are reevaluating their bets on the sector.
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