Chinese DeepSeek's AI breakthrough shakes US tech stocks

A groundbreaking advancement by the Chinese artificial intelligence firm DeepSeek has shaken global markets, triggering a sharp selloff in US tech stocks.

Earlier on Wednesday, users attempting to access the platform faced technical difficulties.

Many attempting to access the platform have been met with the frustrating message: "The server is busy. Please try again later."

On Reddit, users speculated that the issue stems from a sudden surge in user numbers, overwhelming DeepSeek’s server capacity.

According to a CNN report, DeepSeek’s new AI model, R1, has demonstrated capabilities comparable to leading US models like ChatGPT—but at a fraction of the cost—raising concerns about the dominance of American technology companies.

DeepSeek, a relatively unknown startup until now, revealed that it had developed its cutting-edge AI model with just USD 5.6 million in computing costs, a stark contrast to the billions spent by US tech giants such as OpenAI, Google, and Meta.

This announcement sent shockwaves through the market, particularly among investors with heavy stakes in AI-driven growth.

Following the revelation, the Nasdaq Composite dropped 3.1 percent, while the S&P 500 slid 1.5 percent. Nvidia, a leading supplier of AI chips, suffered its worst single-day market loss ever, dropping nearly 17 percent and wiping out USD 588.8 billion in market value.

Other major tech companies, including Meta, Alphabet, and AI chipmakers like Marvell and Broadcom, also experienced sharp declines.

Market analysts note that investors are now questioning the vast sums American firms are pouring into AI development and whether these expenditures will yield sustainable profits.

The report also highlighted that beyond tech stocks, the upheaval led to a significant shift in investor sentiment. Energy companies, which have benefited from AI-driven electricity demand, saw their stocks tumble. Constellation Energy, a company involved in AI-related power projects, fell 21 percent, while Vistra dropped 28 percent. Oil and natural gas futures also declined sharply, reflecting changing expectations about AI-related energy consumption.

Even cryptocurrencies took a hit, with Bitcoin and other digital assets tumbling as investors reassessed the AI investment landscape.