Global tech stocks fall as China AI Chatbot Deepseek Spooks Investors | Stock markets

Global Technology stocks have taken a hit as the emergence of a Chinese Chatbot competitor to Openais Chatgpt, Deepseek, raised doubts about the sustainability of the US artificial intelligence boom.

Shares of companies listed in Asia and Europe fell on Monday, and the tech-heavy NASDAQ index in New York was poised to open lower after investors digested the implications of AI models developed by startup Deepseek.

The Deepseek AI assistant topped the Apple App Store in the US and UK over the weekend, over Openai’s Chatgpt.

Shares of US-based AI-related companies such as Nvidia, Microsoft and Meta were expected to fall when US markets open.

Deepseek claims to have used fewer chips than its rivals to develop its models, making them cheaper to produce and raising questions over a multibillion-dollar AI spending spike by US companies that has boosted markets in recent years.

The company developed bespoke algorithms to build its model using reduced-capacity H800 chips produced by America’s NVIDIA and spending less than $6m (£4.8m), according to a research paper published in December.

Nvidia’s most advanced chips, the H100s, have been banned from exports to China since September 2022 by US sanctions. NVIDIA then developed the less powerful H800 chips for the Chinese market, although they were also banned from export to China last October.

Deepseek’s success in building an advanced AI model without access to the most advanced US technology has raised concerns about the effectiveness of Washington’s attempts to stifle China’s hi-tech sector.

Marc Andreessen, a leading US venture capitalist, likened the launch of Deepseek’s R1 model to a pivotal moment in the US-OSSR Space Race, broadcasting on X on Sunday that it was Ai’s “Sputnik moment”.

According to Deepseek, its R1 model outperforms Openai’s O1 mini model across “various benchmarks”, while Research by artificial analysis Puts it above models developed by Google, Meta and Anthropic in terms of overall quality.

The company was founded by entrepreneur Liang Wenfeng, who runs a hedge fund, High-Flyer Capital, that uses AI to identify patterns in stock prices. Liang reportedly started buying NVIDIA chips in 2021 to develop AI models as a hobby, bankrolled by his hedge fund. In 2023, he founded Deepseek, based in the eastern Chinese city of Hangzhou.

The company is purely focused on research rather than commercial products – the Deepseek assistant and underlying code can be downloaded for free. In an interview with Chinese media, Liang said “AI should be affordable and accessible to everyone.” Liang also said that the gap between us and the Chinese AI was only one to two years.

The deepseek development casts doubt on the necessity of continued investment in AI infrastructure such as chips and the market-leading role of US tech companies in AI, which in turn threatens to put US tech sector valuations under pressure.

The pan-European Stoxx 600 lost 0.75% on Monday morning, and technology stocks were down 4.5%. Dutch chipmaker ASML slipped 8.2%, while Germany’s Siemens Energy, which provides hardware for AI infrastructure, lost 4.1% and France’s digital automation firm Schneider Electric fell 6.8%.

US-listed shares of NVIDIA, the chipmaker at the forefront of AI development and the world’s most valuable publicly traded company, with a valuation of $3.5tn, were down more than 11% in pre-market trading.

That followed losses in Asia, where Japanese chip companies disco and abandoned – a supplier to NVIDIA – suffered declines of 1.8% and 8.6% respectively. In the US, NASDAQ 100 futures were down 2.6% and S&P 500 futures slipped 1.4%.

Richard Hunter, head of markets at the platform’s interactive investor, said: “It will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry that has driven much of the gains that seen in The most important indices in the last few years.

“The bigger question has suddenly become whether the hundreds of billions of dollars of investment in AI need re-evaluation.”