Washington: Chinese companies are wreaking havoc on US tech firms’ stock prices as their products surpass American ones in sales, downloads, and cost-effective solutions. Chinese artificial intelligence (AI) chatbot DeepSeek has overtaken OpenAI’s ChatGPT in downloads and was the most downloaded free app on the App Store on Monday, triggering significant drops in US stock markets.
According to Anadolu Agency, US tech stocks had previously experienced a week-long surge following President Donald Trump’s inauguration on Jan. 20. Shares of major tech firms skyrocketed between Jan. 17 and Jan. 24, with Nvidia rising 3.54%, SoftBank 16.2%, Oracle 14%, ARM 8.88%, and MGX 13.79%. Meta gained 5.66%, Amazon 3.94%, Google 2.2%, Monolithic Power Systems 8.4%, Vertiv 7.68%, Broadcom 3.05%, Cisco Systems 3.32%, and Dell Technologies 3.7%.
However, following DeepSeek’s rise, Nvidia plummeted nearly 17% on Monday, losing around $600 billion in market value – the biggest daily decline in US history. Other losses included ARM 10.24%, SoftBank 12.7%, Oracle 13.8%, MGX 6.79%, Tesla 8.24%, Microsoft 2.14%, Google 4.03%, Monolithic Power Systems 11.44%, Vertiv 29.88%, Broadcom 17.4%, Cisco Systems 5.03%, and Dell Technologies 8.7%. Although US tech stocks regained some ground on Tuesday, the shock from DeepSeek continues to weigh on valuations.
DeepSeek, a Chinese AI firm specializing in large language models (LLMs), was founded in 2023 by Liang Wenfeng, a co-founder of hedge fund High-Flyer. The company develops open-source AI models, including DeepSeek-R1, one of its flagship models. It was reportedly trained at a fraction of the cost – $6 million compared to OpenAI’s $100 million GPT-4 in 2023 – while using only one-tenth of the processing power of a comparable LLM. Despite these resource differences, reports indicate DeepSeek-R1 delivers performance on par with OpenAI’s GPT-4o.
The emergence of DeepSeek has occurred against the backdrop of US tariff threats and AI-related restrictions aimed at curbing China’s ability to develop advanced AI systems. DeepSeek has actively recruited young AI researchers from top Chinese universities and broadened its talent pool by hiring professionals beyond computer science. According to the company, its AI chatbot was entirely developed by Chinese software developers, unlike Silicon Valley’s AI models, which include foreign nationals working in the US on H-1B visas.
DeepSeek’s sudden rise and its ripple effect on US markets prompted widespread reactions, including from President Trump. Trump emphasized the need for American industries to focus on competition, stating, “The release of DeepSeek, AI from a Chinese company, should be a wake-up call for our industries that we need to be laser-focused on competing to win.” He acknowledged China’s AI advances and suggested US firms should achieve better results while reducing costs.
Nvidia also responded to DeepSeek’s emergence, calling it “an excellent AI advancement” while stressing that the rising demand for AI models will require significant chip supplies. DeepSeek’s work illustrates how new models can be created by “leveraging widely available models and compute that is fully export control compliant,” Nvidia said in a statement.
The US-China rivalry extends to semiconductors, with Washington imposing restrictions on Beijing’s chip industry. On Dec. 2, the US Commerce Department announced restrictions on the sale of two dozen types of semiconductor manufacturing equipment and barred several Chinese firms from using American technology. In response, China’s Commerce Ministry accused the US of “abusing” export regulations and threatening global supply chain stability, leading to further tensions.
The tech rivalry also encompasses electric vehicles (EVs) and smartphones. Chinese EV maker BYD recently overtook Tesla in global EV sales, leading to a decline in Tesla’s stock. Additionally, Chinese smartphone brands such as Xiaomi, Transsion, and Vivo have gained market share, while US-based Apple and South Korea’s Samsung have experienced declines in global smartphone sales.
The evolving landscape highlights the intensifying competition between Chinese and US tech companies across various sectors, from AI and semiconductors to electric vehicles and smartphones.