DeepSeek, the Chinese start-up firm, is giving a hard time to the bigger AI players in the market. The US stock futures are in deep red, with S&P 500 contracts down 2.5%, the Dow Jones dropping roughly 400 points, and the Nasdaq sliding over 4.5%, driven by growing concerns about the US’s dominance in AI.
The biggest casualty is undoubtedly the AI darling of the US stock market – Nvidia.
Nvidia stock has been hammered hard in the pre-market trading after the rapid rise of a Chinese company’s new artificial intelligence chatbot raised concerns about how long the U.S. tech rally can last. Nvidia is hitting lower levels and is down by 12% in pre-market and is set to open much lower on Monday.
Shares of other AI chipmakers are also plunging with software group Palantir Technologies is down nearly 10%. Super Micro Computer, which makes servers, sees its stock drop 12%.
Stock Futures are diving as DeepSeek AI has sent a chill through markets with Dow, S&P 500, and Nasdaq futures dropping in premarket trading on Monday.
Chinese startup DeepSeek’s latest AI model known for its cost-effectiveness and capacity to run on less-advanced CPUs, received major attention as its AI Assistant toppled ChatGPT to become the top-rated free app on the US Apple App Store.
In international markets, chipmakers and electrical businesses felt pressure from concerns about the DeepSeek AI service. SoftBank, the business that announced it will invest up to $500 billion in AI infrastructure and is the majority shareholder of microprocessor manufacturer ARM, saw its stock fall 8%.
Perhaps more notable were the energy and industrial businesses associated with electrification that slumped as well: Furukawa Electric lost 11% in Tokyo, Siemens Energy shares fell 17% in Frankfurt, and Schneider Electric fell 8% in Paris.
“Energy stocks are tumbling amid the launch of China’s DeepSeek AI model, which is as powerful as GPT-4, but requires far less computing power. The innovation has triggered fears that demand for energy-intensive AI infrastructure could falter, sending ripples through the markets,” says Nigel Green, the CEO of global financial advisory giant deVere Group.
Meanwhile, traders are eagerly watching the next quarterly reports from megacap tech giants such as Apple, Microsoft, Meta, and Tesla, which are expected to have a significant impact on the direction of the AI-driven bull market. Trump’s move to put tariffs and sanctions on Colombia exacerbated the bad attitude among investors. On the economic front, the Federal Reserve is expected to keep interest rates unchanged, while major data releases, such as GDP growth and PCE inflation estimates, remain in focus.