Global tech stocks are experiencing a significant sell-off as concerns over China’s artificial intelligence (AI) company DeepSeek emerge.
The company’s advancements have raised questions about whether the US can maintain its leadership in the AI space, especially considering the heavy financial investments made by American tech giants in this sector. Futures tied to the tech-heavy Nasdaq-100 index are down by more than 3%, with premarket trading showing significant losses in major US chip stocks, such as Nvidia and Broadcom, which are both down roughly 8%. Meanwhile, in Europe, chip equipment company ASML saw its shares drop by over 9%.
DeepSeek, a Chinese AI startup, has gained attention for its ability to develop large language models (LLMs) that rival those of US-based companies like OpenAI, despite using less advanced chips and incurring much lower development costs. This has raised concerns over the computing power needed for AI systems, a critical factor driving demand for chips and other hardware. Some analysts believe DeepSeek’s competitive performance could put pressure on US tech firms that have been heavily investing in AI infrastructure.
The news surrounding DeepSeek has rattled tech investors, leading to declines in stock prices across the AI sector, including major players like SoftBank in Japan, which is involved in building data centers for OpenAI, and Nvidia, which supplies chips for AI development. Furthermore, the increasing competition from Chinese AI companies could affect the profitability of US tech giants, especially as their capital spending on AI continues to soar.
As the week progresses, investors will also be closely watching China’s official manufacturing and services sector Purchasing Managers’ Index (PMI) reports for January, set to be released today. These figures are expected to offer insight into China’s economic growth, with the manufacturing PMI anticipated to remain steady at 50.1. While this indicates expansion in the sector, the growth rate appears to be relatively slow.
Additionally, concerns about the dollar’s performance continue to weigh on global markets. The US dollar fell 1.8% last week, its worst week since November 2023, raising questions about the strength of the US economy. The dollar’s movements are particularly important, as its value has been closely correlated with US stocks, including tech companies that have benefited from global capital inflows.
With input from Reuters, the Wall Street Journal, and Investor’s Business Daily.
