Nvidia shares fall after China's DeepSeek AI release triggers tech stock selloff

DeepSeek, founded by quant fund chief Liang Wenfeng released its latest AI model just last week and is now seen as a competitor to OpenAI and Meta Platforms Inc

Nvidia Corp shares plunged early today during premarket trading in the US after Chinese artificial intelligence (AI) startup DeepSeek appeared to provide comparable performance to Western chatbots, but at a fraction of the price, Bloomberg reported.

The DeepSeek application arranged on a smartphone in Hong Kong, China, on Monday, Jan. 27, 2025. Chinese startup DeepSeek's eponymous AI assistant rocketed to the top of Apple Inc.'s iPhone download charts, stirring doubts in Silicon Valley about the strength of America's lead in AI. ( Lam Yik/Bloomberg)

At 4 pm IST (5:29 am ET), the company's share price was at $126.75 on the Nasdaq. This is a drop of 11.13% or $15.87.

Meanwhile, the tech-heavy Nasdaq composite index was also down 0.50% or by 99.38 points, reaching 19,954.30.

DeepSeek, founded by Quant fund chief Liang Wenfeng, released its latest AI model just last week and is now seen as a competitor to OpenAI and Meta Platforms Inc.

Its open-sourced product is now already at the top of Apple Inc.’s App Store rankings.

“Concerns have immediately emerged that it could be a disruptor to the current AI business model, which relies on high-end chips and extensive computing power and hence energy,” the report quoted Jefferies analysts as saying in a note to clients.

This is despite the US banning exports of advanced semiconductor technologies to China, and even limiting sales of advanced Nvidia AI chips to many countries, including its allies.

Even the Netherlands-based ASML has seen its stock take a beating due to the same reason. The Dutch government had also restricted immersion deep ultraviolet lithography systems export to China after pressure from the Biden administration.

However, DeepSeek worked around this by focusing on greater efficiency with limited resources, according to the report.

All of this also comes at a time when OpenAI, SoftBank Group Corp. and Oracle Corp. had announced a $100 billion joint venture called Stargate to build data centers and AI infrastructure projects around the US.