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America’s AI race among U.S. tech titans got suckered after Chinese AI app DeepSeek crashed onto the scene, sending investors into reverse.
The tech-heavy Nasdaq Composite nearly erased its gains for the year, falling 3% on Monday.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| I:COMP | NASDAQ COMPOSITE INDEX | 19341.833835 | -612.47 | -3.07% |
| SP500 | S&P 500 | 6012.28 | -88.96 | -1.46% |
DeepSeek’s model appears able to match the capability of chatbots like OpenAI’s ChatGPT and Meta’s Llama but at a fraction of the development cost. It also rose to No. 1 on the Apple App Store over the weekend. It is also reportedly able to use reduced-capability chips from Nvidia.
SILICON VALLEY PRAISES CHINA’S DEEPSEEK APP
The chipmaker, a darling of AI, lost almost 17%. It’s the worst percentage day since March 2020, as tracked by Dow Jones Market Group. About $600 billion in market cap was wiped out and trimmed CEO Jensen Huang’s net worth by about $20 billion in one day.
HOW DEEPSEEK IS SHAKING US AI DOMINANCE
Nvidia CEO Jensen Huang holds a Nvidia Drive Thor processor at the Consumer Electronics Show in Las Vegas on Jan. 6, 2025. (PATRICK T. FALLON/AFP via Getty Images)
An Nvidia spokesperson told FOX Business: “DeepSeek is an excellent AI advancement and a perfect example of Test Time Scaling. DeepSeek’s work illustrates how new models can be created using that technique, leveraging widely-available models and compute that is fully export control compliant. Inference requires significant numbers of NVIDIA GPUs and high-performance networking. We now have three scaling laws: pre-training and post-training, which continue, and new test-time scaling.”
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GOOGL | ALPHABET INC. | 191.81 | -8.40 | -4.20% |
| PLTR | PALANTIR TECHNOLOGIES INC. | 75.44 | -3.54 | -4.48% |
| MSFT | MICROSOFT CORP. | 434.56 | -9.49 | -2.14% |
| META | META PLATFORMS INC. | 659.88 | +12.39 | +1.91% |
Other AI players, Google, Microsoft and Palantir, also saw steep losses, while Meta rose after it hiked capital spending plans to as much as $65 billion this year.
A handful of nuclear power plants also got slammed. Investors worry that the companies that control heating and cooling for AI may not see the demand if DeepSeek turns out to be the real deal. Constellation Energy, Talen and Vistra all lost ground.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CEG | CONSTELLATION ENERGY CORP. | 275.00 | -72.44 | -20.85% |
| TLN | TALEN ENERGY | 192.16 | -52.90 | -21.59% |
| VST | VISTRA CORP | 136.96 | -54.14 | -28.33% |
WedBush analyst Dan Ives said in a research note that while DeepSeek’s model is “impressive,” he warned investors this is not a dealbreaker for the AI revolution and told clients to buy amid the sell-off.
“The bears dominate the weekend narrative and try to scare investors this is a black swan moment. It’s actually the opposite. If inference training accelerates it speeds up AI Revolution..bullish for hyperscalers, Nvidia and use cases. DeepSeek impressive LLM..it ends there,” he posted on X.
The tech rout spilled into Bitcoin, which briefly fell below $100,000 before recovering some of those losses.
As investors sold tech, they rotated into more defensive names, including Procter & Gamble, Coca-Cola and insurance company Travelers. These stocks helped propel the Dow Jones Industrial Average to a 289-point gain.
Dow Jones Industrial Average
Bonds also fell with the 10-year Treasury yield hitting 4.529%, the lowest since Dec. 20, 2024.
