A Chinese AI-powered chatbot developed by DeepSeek has rapidly become the most downloaded free app on Apple’s store since its U.S. launch in January.

The app’s swift rise, coupled with DeepSeek’s reportedly lower costs compared to U.S.-based AI firms, has sent financial markets into turmoil.

Silicon Valley venture capitalist Marc Andreessen has praised DeepSeek as “one of the most amazing and impressive breakthroughs” in AI.

According to the company, its latest AI models rival industry leaders like ChatGPT—delivering comparable performance at a significantly lower cost.

DeepSeek AI Shakes Global Markets, Causes Massive Sell-Off in Tech Stocks

A low-cost artificial intelligence startup from China, DeepSeek AI, has sent shockwaves through global stock markets, triggering a massive decline in U.S. tech stocks. The startup, based in Hangzhou, has particularly impacted Nvidia, wiping out $593 billion in market value overnight—marking a historic 17% single-day decline for the Silicon Valley tech giant, according to LSEG data. This is the largest one-day market capitalization loss recorded in Wall Street history.

DeepSeek AI’s Disruptive Entry

DeepSeek AI’s latest technology has intensified competition in the AI sector, posing a significant challenge to U.S.-based firms like Nvidia. The company introduced an AI assistant that claims to operate efficiently with lower data requirements and significantly reduced costs, making it an attractive alternative to OpenAI’s ChatGPT, Google’s Gemini, and similar platforms.

A Reuters report noted that by January 27, DeepSeek AI had already overtaken ChatGPT in terms of downloads from the U.S. iOS App Store. The trend was similar in other regions, including the UK, Australia, Canada, China, and Singapore.

DeepSeek’s Cutting-Edge Models

The company has developed DeepSeek-V3 and DeepSeek-R1 models. According to reports, the Hangzhou-based startup is primarily owned by Liang Wenfeng, co-founder of the quantitative hedge fund High-Flyer.

A research paper released last month revealed that DeepSeek-V3, launched on January 10, was trained using Nvidia’s H800 chips—a lower-capability alternative—spending under $6 million on development. Meanwhile, a post on DeepSeek’s official WeChat account stated that DeepSeek-R1, released recently, is estimated to be 20 to 50 times more cost-efficient than OpenAI’s models, depending on usage.

Tech Stocks in Turmoil: Nvidia, Microsoft, Google Plunge

On January 27, the Nasdaq index plunged 3.1%, largely due to Nvidia’s dramatic fall. Several major tech stocks followed suit:

• Nvidia: Down 17%, marking its largest single-day loss.
• Broadcom Inc.: Declined 17.4%.
• Microsoft: Dropped 2.1%.
• Google (Alphabet Inc.): Fell 4.2%.

The Philadelphia Semiconductor Index saw a 9.2% drop, its worst performance since March 2020. Marvell Technology recorded the biggest fall in the Nasdaq, tumbling 19.1%.

Global Market Impact

The sell-off was not confined to the U.S. market. The downturn began in Asia, with Japan’s SoftBank Group falling 8.3%, and rippled through Europe, where ASML Holdings saw a 7% decline.

Other affected companies included:

• Vertiv Holdings: Dropped 29.9%.
• Vistra Corp.: Fell 28.3%.
• Constellation Energy: Declined 20.8%.
• NRG Energy: Lost 13.2%.

Experts Weigh In: Is DeepSeek AI a Major Threat?

Market analysts believe DeepSeek AI’s emergence is a game-changer. Brian Jacobsen, chief economist at Annex Wealth Management, remarked that if DeepSeek’s claims hold, it could reshape the AI industry. “It’s the proverbial ‘better mousetrap’ that could disrupt the AI-driven market boom seen over the last two years,” he told Reuters. He added that this could lead to lower demand for advanced chips, reduced energy consumption, and a slowdown in data center expansion.

U.S. Government’s Response

Former U.S. President Donald Trump commented on January 27, stating that DeepSeek should be a “wake-up call” for the country. He added that it might even be a positive development for the U.S. in terms of AI regulation and strategy.

Investor Shift: Safe-Haven Assets Rise

In response to the stock market turbulence, investors moved funds into safe-haven assets. The U.S. Treasury 10-year yield fell to 4.53%, while safe-haven currencies such as the Japanese yen and Swiss franc appreciated against the U.S. dollar.

A Wall Street trading executive noted, “With increased volatility in tech stocks, banks may adjust risk management strategies, possibly holding fewer shares or carefully monitoring positions as clients restructure their portfolios.”

As AI competition intensifies, global markets brace for further developments that could redefine the future of the technology sector.