Jan 28

Jan 28 What financial impact did DeepSeek had on global AI market?

Introduction

The recent developments surrounding DeepSeek, a Chinese artificial intelligence startup, have had a significant impact on the global AI market, particularly affecting US technology stocks. On Monday, January 27, 2025, DeepSeek’s latest AI model caused a substantial downturn in the stock market, resulting in a staggering $1 trillion blow to AI-fueled stocks.

Market Impact

Stock Market Reaction

Nasdaq futures plummeted by 5% in premarket trading.

S&P 500 futures sank as much as 3%.

Bitcoin dropped below $100,000.

Tech Giants Affected

Nvidia Corp., a leading AI chip manufacturer, experienced a dramatic 12% plunge in US premarket trading.

If this drop holds, Nvidia is set for the biggest single-day market capitalization loss on record.

Reasons for the Market Reaction

Cost-Effective AI Model: DeepSeek’s latest AI model is reported to be cost-effective while running on reduced-capability chips.

Threat to US Tech Dominance: The Chinese firm’s product has raised questions about the dominance of US technology in the AI sector.

App Store Success: DeepSeek’s product, released just last week, quickly rose to the top of Apple Inc.’s App Store rankings, demonstrating its rapid adoption and potential.

Conclusion

This market reaction highlights the volatility and sensitivity of AI-related stocks to new technological developments, especially those that could potentially disrupt the current market leaders. The $1 trillion loss underscores the massive valuations that AI companies have achieved and the market’s swift response to potential shifts in the competitive landscape.

Antonio Bhardwaj

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