Advanced microchip developers and a slew of tech concerns watched their stock prices tumble early Monday amid concerns Chinese AI startup DeepSeek was already outpacing U.S.-developed artificial intelligence tools based on newly released performance assessments.
Little is known about the computing hardware supporting DeepSeek, which launched last month. But the company claims it developed its large language model in two months for less than $6 million. The company released a free, open-source LLM in December and, according to a report from Associated Press, DeepSeek’s app had already hit the top of Apple’s App Store chart by early Monday morning. Analysts told AP such a feat would be particularly impressive given how the U.S. government has restricted Chinese access to top AI chips.
A data set generated by third-party performance testing released last week shows DeepSeek’s reasoning model outperforming OpenAI’s industry-leading AI engine in some categories. OpenAI’s ChatGPT has been in development for years and is backed by tens of billions of dollars in venture investment, a major share of which has come from U.S. software giant Microsoft.
DeepSeek’s arrival on the AI scene, and recently revealed performance data, sent stock prices for chipmakers, which have been riding wild gains over the last two years amid growing AI frenzy, down sharply to start the week with chipmaker Nvidia’s stock losing over 11% Monday morning. Other Monday morning market losers in the chip sector include Micron and Arm Holdings, down 8% and 9%, respectively, as well as Broadcom and Advanced Micro Devices, per a report from CNBC.
Energy companies with close ties to data center development, the massive and power-hungry computing facilities that power emerging AI software, were also seeing stock value declines Monday including Constellation Energy and Vistra.
The S&P 500 was down 1.6% in morning trading, per AP. Big Tech stocks were seeing some of the biggest losses, with Nvidia down 11.2%, and they dragged the Nasdaq composite down 2.7%. The Dow Jones Industrial Average, which has less of an emphasis on tech, was holding up better with a dip of 123 points, or 0.3%, as of 7:50 a.m. MST.
Some industry watchers questioned DeepSeek’s claims about development time and total investment and predicted the ultimate impact the company would have on U.S.-based AI developers would be borne out over time.
“It remains to be seen if DeepSeek found a way to work around these chip restrictions rules and what chips they ultimately used as there will be many skeptics around this issue given the information is coming from China,” according to Dan Ives, an analyst with Wedbush Securities, per AP.
Analysts at Bernstein Research report that DeepSeek’s models “look fantastic” but shouldn’t be thought of as “miracles,” per a CNBC report. Any panic about the “death-knell of the AI infrastructure complex as we know it,” Bernstein analysts said, was “overblown.”