DeepSeek's AI Model Rivals Chat GPT; Nasdaq, Nikkei Worry Over Challege To US Tech Industry

An unexpected challenge to the US tech and AI industry's hegemony over the past few years has come from the Chinese AI startup DeepSeek. According to analysts and investors worldwide, DeepSeek may have a big effect on US tech stock performance and, consequently, on world markets.

DeepSeek specifically takes on big American firms that have long controlled the AI market, including Nvidia, OpenAI, Google, and Meta.

Monday's Asian trading hours saw a sharp decline in US stock index futures, with the S&P 500 futures dropping up to 1 per cent and the Nasdaq 100 futures dropping almost 1.9 per cent.

"The sell-off reflects growing investor concern that DeepSeek's cost-effective AI model, developed using reduced-capability chips, could disrupt the business models of US giants like Nvidia Corp., OpenAI, and Google," Bloomberg reported.

Asian markets, meanwhile, responded differently. The Nikkei 225 futures in Japan fell 0.6 per cent, while the Hang Seng Tech Index in Hong Kong increased 2 percent.

While SoftBank Group Corp., which had risen last week on plans for AI infrastructure, saw a 5.4 per cent decline in Tokyo trading, shares of Advantest Corp., a significant supplier to Nvidia, fell 8.6 per cent.

Even though DeepSeek's ground-breaking AI model has changed the dynamics of the market, it still has trouble competing with the US tech behemoths.

According to Forbes, the company's severe computational disadvantage is made worse by US export restrictions on cutting-edge chips. To grow its business and compete internationally, DeepSeek will need to close this gap.

The pressure on US tech companies, many of which are scheduled to release their earnings this week, is increased by the timing of DeepSeek's release.