Major tech stocks including Nvidia, Microsoft, Meta and Tesla fell in premarket trading on concerns that a Chinese artificial intelligence startup could threaten America’s dominance in AI.
Shares of Nvidia fell nearly 12% on news reports about the capabilities of DeepSeek — a China-based startup that has made waves in the industry after launching a free, open-source prototype in a large language in December.
DeepSeek was reportedly developed in just two months at a cost of under $6 million – a stark contrast to the billions of dollars Western tech giants typically spend on AI research and infrastructure.
The developments triggered a global sell-off, particularly affecting semiconductor firms, as fears grew over the durability of US dominance in the sector.
Shares of Nvidia, a key player in AI-driven chip design and a significant beneficiary of the AI boom, fell 11.8% as of 7:05 a.m. ET before the market opened on Monday.
Microsoft, which has invested billions of dollars in Sam Altman’s OpenAI, the company behind ChatGPT, was down 4.1% in premarket trading. Meta shares fell 1.7% while Tesla saw its share price up more than 2.7% in premarket trading.
European chipmakers also faced sharp declines, with Netherlands-based ASML and ASM International falling 8.9% and 13.6% respectively.
Meanwhile, Nasdaq futures are down 2.3%, S&P 500 futures are down 1.3% and Dow Jones Industrial Average futures are down 0.9% before the opening bell on Monday.
DeepSeek’s rapid progress has prompted scrutiny of the vast sums being poured into AI research by major US firms, raising questions about efficiency and cost-effectiveness.
“DeepSeek clearly doesn’t have access to as much compute as US hyperscalers and somehow managed to develop a model that looks very competitive,” Srini Pajjuri, a semiconductor analyst at Raymond James, said in a note on Monday.
Meanwhile, analysts at Citi acknowledge that DeepSeek’s technological advances have raised questions among investors about the cost of computing power.
However, they point out that US companies still retain a significant advantage due to their access to more sophisticated chips.
“While US companies’ dominance in cutting-edge AI models could potentially be challenged, their access to high-end GPUs remains a key differentiator,” Citi analysts said in a note.
The market turmoil coincides with a broader push by the US government to strengthen AI leadership.
President Trump recently announced a $500 billion AI initiative known as Stargate.
The large amount of money being invested in the project, which includes the involvement of major firms such as OpenAI, Oracle and SoftBank, underscores the strategic importance of advanced chips in maintaining American competitiveness in AI development.
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