In brief
The launch of DeepSeek, a Chinese-made AI app, caused initial turmoil in US tech stocks, raising questions about America's dominance in AI and prompting reactions from investors and officials alike.
Article text:US tech stocks saw a steadying of prices on Tuesday following a sell-off on Monday triggered by the sudden emergence of Chinese-developed AI app DeepSeek. Shares of leading chip manufacturer Nvidia, which had dropped sharply, climbed back up by 8.8% as analysts suggested that the market’s steep response may have been hasty. This pushback came in response to DeepSeek's assertion that its AI model was produced at a significantly lower cost compared to competitors.The rise of DeepSeek has shaken investor confidence and raised alarms about the future landscape of artificial intelligence in the US. President Donald Trump labeled the event a "wake-up call" for the American tech sector, suggesting that the competition could ultimately benefit US innovation. He remarked, “If you could do it cheaper and get to the same end result, that’s a good thing for us,” indicating a mix of optimism and concern over the competitive dynamics in the AI field.With DeepSeek having taken the US market by storm as its most downloaded free app shortly after launch, many investors scrambled to reassess their stakes in AI, fearing a bubble as optimism about AI-powered stocks has driven a market boom for the last couple of years. Nvidia, whose shares previously surged as AI demand skyrocketed, bore the brunt of Monday's market jitters, losing nearly 17% of its value and approximately $600 billion in market capitalization.Market experts are optimistic that the lowered costs of AI models could actually spur further investments and adoption by companies, welcoming a new era of tech innovation. Janet Mui, a market analyst, noted that companies like Apple might find an opportunity as AI models become cheaper and more accessible.Despite the initial shock to the markets, the main indexes stabilized as investors absorbed the news. The Dow Jones Industrial Average closed up 0.3%, with the Nasdaq gaining a notable 2%. Meanwhile, Asian markets reacted negatively with a drop in AI-linked stocks, particularly in Japan, as the region prepared for the Lunar New Year holiday.Founded in 2023 by Liang Wenfeng, who also established the financing for the venture, DeepSeek’s tech has been recognized as competitive, with claims of performance akin to that of OpenAI models. While some industry leaders, including OpenAI's chief Sam Altman, have expressed admiration for DeepSeek's achievements, concerns about data security and trustworthiness have also surfaced, highlighting the need for caution as the app continues to ascend in popularity.The rapid rise of DeepSeek requires ongoing scrutiny from industry watchers, as this substantial shift in the AI landscape poses implications not just for US technology leadership but also for security, privacy, and market dynamics moving forward.
