Several major U.S. tech and artificial intelligence stocks tumbled in premarket trading early on Monday, after the successful launch of Chinese startup DeepSeek’s latest AI model—which impressed observers by running on less powerful chips compared to U.S. rivals like OpenAI’s o1—triggered questions about America’s leadership in the space.
Since the launch of DeepSeek’s latest R1 AI model last week, the company’s app has surged to the top … [+]
The tech-centric Nasdaq 100 Futures slumped by 4.3% to 20,950 early on Monday, while the S&P 500 Futures fell around 2.5% and Dow Futures were down nearly nearly 0.8%
Top AI-related tech and silicon stocks were also impacted by the selloff with the share price of chipmaking giant Nvidia dropping nearly 13% in premarket to $124.
Shares of Microsoft, Google and Meta were also down 6.7%, 4.6% and 5.5% respectively in early morning trading on Monday.
Top silicon stocks were also hit with chipmakers AMD and Broadcom’s shares tanking 6.3% and 12.9% respectively in the premarket, while the Dutch-listed shares of ASML—maker of the world’s most advanced chip-making machines—was down 10.62% two hours after markets opened in Europe.
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DeepSeek is a Chinese AI startup based out of Hangzhou that is less than two years old. The company was spun off in March 2023 from High-Flyer Quant, a Chinese hedge fund that heavily used AI to manage its trades. DeepSeek launched its AI language model in November 2023 as an open-source product—allowing users to download and run it locally on their own computers. DeepSeek’s latest product R1—an open-sourced so-called “reasoning model”—launched last week and the company claims its performance matches OpenAI’s o1 model in certain benchmarks.
Even though it matches rival models from OpenAI and Meta on certain benchmarks, DeepSeek’s model also appears to be more efficient, which means it requires less computing power to train and run. The MIT Technology Review reported this is likely an unintended outcome of U.S. export controls on high-end AI chips to China—which is forcing startups in the country to “prioritize efficiency.” Billionaire and Silicon Valley venture capitalist Marc Andreessen described R1 as “AI’s Sputnik moment,” in an X post. The efficiency has also allowed DeepSeek to massively undercut OpenAI on pricing, as its application programming interface (API)—which allows other businesses and platforms to leverage the startup’s AI model—costs just $0.55 per million input tokens and $2.19 per million output tokens, compared to $15 and $60 for OpenAI’s o1.
Like several major tech platforms based out of China, DeepSeek appears to censor content that is deemed to be sensitive by Beijing. For example, when asked about the Tiananmen Square protests, the chatbot responds with: “Sorry, that’s beyond my current scope. Let’s talk about something else.”
DeepSeek’s iPhone app surged to the top of the App Store’s download charts for free apps in the U.S. on Sunday, overtaking OpenAI’s ChatGPT.
How a top Chinese AI model overcame US sanctions (MIT Technology Review)
How Chinese AI Startup DeepSeek Made a Model that Rivals OpenAI (Wired)
