Nvidia falls 10% in premarket trade as China’s DeepSeek sparks global tech sales

Why China's DeepSeek is jeopardizing America's AI lead

U.S. tech companies plunged in premarket trading as Chinese startup DeepSeek sparked concerns over AI competitiveness and the U.S. leader in the sector, triggering a global selloff.

Shares of chip designer Nvidiaa big beneficiary of the AI ​​hype, fell 9.84% at 5:11 a.m. ET before the market opened. Netherlands-based chip companies ASML and ASM International fell 10.59% and 14.94% respectively in European trade, while Japanese chip-related stocks in Asia were broadly lower.

DeepSeek launched a free, open-source large-language model in late December, claiming it was developed in only two months at a cost of less than $6 million – a much smaller outlay than that demanded by Western counterparts. Last week, the company released a reasoning model that also reportedly overachieved OpenAI’s latest in many third-party tests.

The development has called into question how much money large technology companies have invested in AI models and data centers.

“DeepSeek clearly doesn’t have access to as much data processing as US hyperscalers and somehow managed to develop a model that seems very competitive,” Srini Pajjuri, semiconductor analyst at Raymond James, said in a note on Monday.

Workers move semiconductor testers on the assembly line at the Advantest Corp. factory in Ora, Japan on August 10, 2012.

Japanese chip shares fall as DeepSeek’s challenge to US AI dominance raises concerns for Asian tech companies

– CNBC’s Lee Ying Shan and Michael Bloom contributed to this story.

This news story will be updated.