Chinese AI threat triggers $1 trillion market crash
A breakthrough Chinese chatbot has sparked alarm about the country’s advances in artificial intelligence (AI) and wiped close to $1 trillion off global stock markets.
A heavily-censored Chinese chatbot called DeepSeek shot to the top of Western app download charts on Monday in what was described as a “Sputnik moment” for AI.
Follow the latest live blog on DeepSeek
American technology stocks tumbled in response, driven by fears that heavy-spending on AI by Silicon Valley companies that has been championed by Donald Trump will fail to yield profits for investors.
California’s Nvidia, the semiconductor giant that has become the world’s most valuable company on the back of the AI boom, at one point slumped by more than $600 billion in the biggest one-day loss of value for a single company in history.
DeepSeek, a chatbot that strictly toes Beijing’s line on issues from human rights to Taiwan, is seen as the first Chinese AI to rival those developed by US tech giants such as Google, OpenAI and Facebook’s owner Meta.
The Chinese AI’s inventors claim it was developed using far less computing power than rival systems and despite trade restrictions blocking China from accessing the most advanced AI supercomputer components.
President Trump’s AI tsar David Sacks said DeepSeek showed “the AI race will be very competitive”. He said: “I’m confident in the US but we can’t be complacent.”
The Prime Minister’s spokesman downplayed suggestions the UK was at risk of being left behind, saying Britain had “significant strengths in AI” and “some very strong players in the market”. Sir Keir Starmer has said the UK should become one of the “great AI superpowers”.
US tech companies have committed to spending hundreds of billions in the belief that building super-human AI will require unprecedented investments in data centres, electricity and microchips.
Last week Donald Trump hailed a $500 billion (£400 billion) plan by the tech companies OpenAI, SoftBank and Oracle as the “largest AI infrastructure project in history”. In contrast, DeepSeek claims that one of its recent systems cost just $5.6 million to develop.
The claim sparked alarm about possible overspending by US companies. America’s Nasdaq stock market fell by more than 3 per cent on Monday, with the drop at one point wiping more than $1 trillion off the index of technology stocks. Shares in Nvidia fell by more than 15 per cent.
Marc Andreessen, the Trump-backing Silicon Valley venture capitalist, said DeepSeek’s latest “R1” system was “one of the most amazing and impressive breakthroughs I’ve ever seen” and called it “AI’s Sputnik moment”, in reference to the Soviet satellite that shocked the Western world in 1957 and accelerated the Cold War space race.
DeepSeek’s success will also ignite concerns about China’s influence over the global internet.
Chinese chatbots are rigorously tested by Beijing’s censors to ensure that they adhere to “core socialist values”. DeepSeek refuses to answer questions on subjects such as the Tiananmen Square protests. It insists that Taiwan is an “inalienable part of China” and that reports of human rights abuses in Xinjiang are “unfounded and politically motivated”.
Western governments have cracked down on Chinese-owned apps such as TikTok in recent years amid cybersecurity fears and concerns that they could be used to promote Chinese Communist Party views.
The US has heavily restricted Chinese access to the most advanced AI microchips on national security grounds, with a series of trade measures that it had hoped would thwart the country’s advances.
In response to a tweet suggesting that DeepSeek had skirted US export restrictions to access thousands of high-end microchips, Elon Musk said: “Obviously.”
DeepSeek said that it was limiting how many people could sign up “due to large-scale malicious attacks” on its services.
Read the latest updates below.
Signing off...
Thanks for joining us today on this live blog covering DeepSeek and the Wall Street tech sell-off.
Currently, the tech-heavy Nasdaq Composite index is down 3.4pc. Nvidia is down 16.6pc.
Meanwhile, the S&P 500 is down 1.9pc and Dow Jones Industrial Average, of 30 leading US companies, has regained its earlier losses. It is currently up 0.1pc.
DeepSeek a ‘double-edged sword’ for tech giants, says economist
US tech giants face a “double-edged sword” from DeepSeek, and could benefit from it, an economist has said.
John Higgins, chief markets economist at Capital Economics, said that the so-called “hyperscalers”, the tech giants operating data centres that offer cloud computing, “don’t seem to be in a rush to scale back investment in AI”.
He said: “Meanwhile, Stargate [a $500bn (£400bn) investment in artificial intelligence (AI) infrastructure] suggests a general push in the opposite direction, ie, the need for more, not less, investment in the technology in the US.
“Nonetheless, if it became clear that AI models could indeed be trained effectively with less high-end computing power than had previously been assumed, there would clearly be a risk of a further correction in the US stock market. That’s because this would potentially undermine the dominant positions of some firms that have powered the rally.
“Having said that, while such an outcome would conceivably be detrimental for the semiconductor industry, it would potentially be a double-edged sword for some hyperscalers (insofar as it lowered their capital costs, but undermined their dominance in the marketplace). And it would presumably be beneficial for users and consumers of cheaper and easier-to-access AI models.”
US sell-off hits European tech firms
The sell-off of tech firms in the US also spread to continental Europe. In the Netherlands, chip equipment giant ASML dropped 7pc to touch a two-month low and ASM International slumping more than 12pc.
Two Germany business that provide electric hardware for AI infrastructure tanked. Siemens Energy plunged 19.9pc, while Schneider Electric fell 9.6pc. They were among the weakest performers on the pan-European Stoxx 600 index.
The sell-off comes after the Stoxx 600 touched an intra-day record high on Friday and as investors await earnings from U.S. tech giants Apple, Meta, Microsoft and Tesla later this week.
DeepSeek won’t destroy demand for AI chips, says investment manager
Chipmakers have taken a pounding today on the back of reports that China’s DeepSeek can deliver good AI without lots of hardware.
Chipmaker Nvidia is down 15.7pc. The tech titan is known as the leader in GPUs, the advanced semiconductors needed to run AI applications.
Meanwhile ARM has lost 10pc and AMD is down 5.8pc. Intel dropped 2.9pc.
Jay Hatfield, chief executive of Infrastructure Capital Advisors, said: “It’s clearly not good for ChatGPT to have an aggressive competitor, but we don’t buy the thesis that this is going to tank the demand for high-end GPUs.”
DeepSeek will unleash Chinese innovation, says tech analyst
Ben Thompson, whose Stratechery newsletter is widely read by tech industry leaders, said today that China is “a big winner, in ways that I suspect will only become apparent over time.”
He added: “Not only does the country have access to DeepSeek, but I suspect that DeepSeek’s relative success to America’s leading AI labs will result in a further unleashing of Chinese innovation as they realise they can compete”.
He also said that consumers could get a big win here, since the AI is “open sourced”.
“DeepSeek has provided a massive gift to nearly everyone. The biggest winners are consumers and businesses who can anticipate a future of effectively-free AI products and services,” he said.
Investors make flight to safety after Nvidia jitters
The tumble in global stocks has prompted a flight to safety, with US government bonds rising and safe-haven currencies surging.
DeepSeek, which overtook rival ChatGPT to become the top-rated free application on Apple’s App Store in the UK and US, says it uses lower-cost chips. This challenges a widespread bet in markets that AI will drive huge expenditure with chipmakers.
On Wall Street, the Dow Jones Industrial Average fell 0.1pc, the S&P 500 dropped 1.8pc, and the Nasdaq Composite slumped 3pc.
Nvidia, whose chips are the top choice for powering AI applications, dropped 15.5pc in line with industry peers Broadcom and Marvell Technology. The CBOE Volatility Index, known as Wall Street’s “fear gauge”, hit its highest level since Dec 20, surging 25pc today.
Robert Savage, head of markets strategy and insights at BNY, said: “The catalyst of a foreign competitor to US-led AI dominance begs other questions about trade and semiconductor chips and energy needs. The markets are unsettled, and volatility is higher after last week’s strong returns.”
In Europe, the pan-European Stoxx 600 index was little changed, but the Stoxx Europe 600 technology index fell 3pc, its biggest one-day drop since mid-October. MSCI’s gauge of stocks across the globe fell 1.25pc, while the FTSE 100 was flat.
US Treasury yields tumbled to multi-week lows today, tracking steep declines in equities, as investors sought the safety of government bonds. The benchmark US 10-year yield dropped 4.546pc from 4.594pc late on Friday.
That pushed the dollar lower, with safe-haven currencies, including the the yen and Swiss franc, as the main beneficiaries.
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DeepSeek struggles under ‘malicious attacks’
Chinese startup DeepSeek is struggling to keep up with demand from new users this afternoon.
Its website says: “Due to large-scale malicious attacks on DeepSeek’s services, registration may be busy. Please wait and try again. Registered users can log in normally. Thank you for your understanding and support.”
Earlier it was hit by outages on its website. Its status page said the company had resolved issues relating to its application programming interface and users’ inability to log in to the website.
The outages on Monday coincided with its sky-rocketing popularity.
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Chinese breakthrough gives hope to Europe, claims academic
Europe’s tech startups should be encouraged by the success of DeepSeek, a Barcelona-based business school professor has said.
Sampsa Samila, director of an AI programme at IESE Business School, said: “DeepSeek has reset expectations on the capital intensity of large language models and shows that the market is in fact rather competitive and not simply dominated by a small number of very large companies.
“It also demonstrates that better thinking can beat vast amounts of money, which should give hope to AI startups in Europe, where we have plenty of human capital but do not have the tens of billions to invest in training LLMs that we see in the US.”
US stock markets starting to change behaviour, says abrdn
Investors in US stocks are starting to focus more closely on profit growth rather than valuations, a leading investment manager has said.
Jamie Mills O’Brien, investment director at abrdn, said: “Jitters in the tech market reinforce our view that investors should not be confining themselves only to the so-called Manificent Seven when looking for growth...
“We are also starting to see signs of a market behaving slightly differently, with earnings growth - rather than [price to earnings] multiple expansion - becoming a more important arbiter of equity returns.
“Historically when you hit the peak of a hiking cycle, market focus turns to earnings growth. And that is what we are seeing again – earnings, not multiples, are driving relative performance in 2024 than they have done over the last couple of years.”
He added: “Emerging markets and China are set to deliver earnings growth over and above the US market. We think that might be significant, in particular given the valuation discrepancy we are seeing.”
Chinese AI could boost US tech giants, says analyst
While Nvidia has plunged today, two of the Magnificent 7 tech stocks have actually risen.
Kathleen Brooks, research director at XTB, said: “Today’s sell off could be an overreaction. If AI can run on less advanced chips, then it opens the door to stronger growth over a shorter time frame.
“This may be bad news for AI’s hardware producers like Nvidia, but surely it is good news for the hyper-scalers, like Microsoft, Meta and the cloud companies? This is reflected in the performance of the Magnificent 7 at the start of this week.”
Nvidia dropped 13.6pc, Amazon is down 1pc, Microsoft is down 3.5pc, Alphabet dropped 2.5pc, Tesla lost 1pc, Apple rose 2.6pc, Meta rose 2pc.
DeepSeek surges to top of Apple’s App Store
Chinese AI app DeepSeek is now leading the list of most popular downloads on the iPhone’s App store in the UK and the US.
American rival ChatGPT is currently in second place.
Bloomberg reported that computer scientist Kai-Fu Lee told the Asian Financial Forum in Hong Kong this month: “The US is great at research and innovation and especially breakthrough, but China is better at engineering. In this day and age, when you have limited compute power and money, you learn how to build things very efficiently.”
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Sell-off is ‘overblown’, says analyst
Dan Ives, a Wall Street analyst at Wedbush Securities, insists the sell-off is overblown.
He said: “No US Global 2000 [company] is going to use a Chinese start-up DeepSeek to launch their AI infrastructure and use cases.
“At the end of the day there is only one chip company in the world launching autonomous, robotics, and broader AI use cases and that is Nvidia.
“Launching a competitive LLM model for consumer use cases is one thing ... launching broader AI infrastructure is a whole other ballgame and nothing with DeepSeek makes us believe anything different.”
Nothing lasts forever - is this AI’s Amstrad moment?
Most tech investors will be nursing their losses today. James Baxter-Derrington writes:
While DeepSeek has disrupted what’s already happening in the space, it remains to be seen if it can lead.
Ritwik Gupta, AI policy researcher at the University of California, Berkeley, said the firm proves “there is no moat when it comes to AI capabilities”.
He added: “The first person to train models has to expend lots of resources to get there, but the second mover can get there cheaper and more quickly.”
If you ask me, this sounds more like Amstrad’s PC1512 than the iPhone. The IBM-compatible model undercut not only the price of other computers on the market, but was available more cheaply than software, which led to the strange scenario wherein a computer was cheaper than some spreadsheet options available.
Read on as James asks: is now the time to buy up cheap tech firms?
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AI ‘game has changed’ after DeepSeek launch, says academic
Prof Michael Woolridge, an AI expert at Oxford University, said DeepSeek’s model challenges the notion that big US AI companies had a “moat” which would be hard for other companies to crack.
He said: “DeepSeek challenges that wisdom, being just as capable as the flagship US models, at a fraction of the scale.
“If the claims are proved to hold up in the weeks ahead, then this will shape up to be a major challenge to the big players.
“And as a side effect, it will also make this technology massively more available than it was previously – admitting a whole range of new actors into the space (which will worry governments, who are already worried about the power that AI puts in the hands of unscrupulous actors).
“And it rather starkly demonstrates that China is very much keeping pace with the US in large-scale AI. I would want to see more evidence to support the claims, but if they do hold up, then the game just changed: scale isn’t everything after all.”
Thanks for following today’s updates so far. My colleague Alex Singleton is stepping up now to keep you informed on what’s happening with the AI tech sell-off.
Chinese AI has sparked a $1 trillion panic – and it doesn’t care about free speech
Have there been human rights abuses in Xinjiang? Ask ChatGPT, the artificial intelligence (AI) chatbot, and you’ll receive an unambiguous yes.
Put the same question to DeepSeek, a Chinese chatbot, and the answer is very different. “Allegations of human rights abuses are unfounded and politically motivated,” it says.
Its response is not unusual: chatbots are heavily muzzled in China, where AI companies are required to instill the “socialist values” of the Communist Party and are regularly tested by Beijing’s censors.
Read how DeepSeek is sending shockwaves through Wall Street – and the West.
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Nvidia suffers biggest rout in stock market history over China AI threat
Nvidia has suffered the largest stock market rout in history at the opening bell on Wall Street.
The world’s most valuable company plunged 13pc as trading began in New York today, wiping more than $465bn (£371bn) off its valuation.
It still leaves the AI chip maker’s market capitalisation at $3.1 trillion (£2.5 trillion) as doubts emerge about US dominance of the nascent industry.
The fall in its value today eclipsed the previous record, a 9pc drop in September that wiped out about $279bn in value, according to Bloomberg.
Microsoft suffers $119bn blow amid China AI fears
Stocks linked to the boom in AI have suffered steep losses at the start of trading on Wall Street over concerns that China will disrupt America’s grip on the burgeoning industry.
Microsoft, which has invested close to $14bn into ChatGPT maker OpenAI, has fallen 3.5pc, knocking more than $119bn (£95bn) off its valuation.
Chip maker Advanced Micro Devices was down 4.8pc while Micron was down 8.9pc.
Dell fell 7pc and Super Micro Computer dropped 8.8pc.
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US stocks plunge over China’s AI threat
US stock markets have plunged at their sharpest pace in five months after a China AI start-up unveiled a new chatbot which threatens to match its major global competitors at a lower cost.
The tech-heavy Nasdaq Composite index on Wall Street plummeted by 3.6pc at the opening bell to 19,234.042 - its biggest fall since September - as DeepSeek’s new artificial intelligence chatbot triggered market turmoil.
AI-focused shares in the US and Europe have suffered a $1 trillion (£799bn) rout after the China app soared to the top of the Apple Store’s download charts.
Chip making giant Nvidia was down 13pc, wiping nearly $465bn (£371bn) off the value of the world’s dominant supplier of AI hardware and software. It had already closed down more than 3pc on Wall Street on Friday.
The Dow Jones Industrial Average fell 275.4 points, or 0.6pc, at the open to 44,148.84. The S&P 500 fell 132.2 points, or 2.2pc, to 5,969.04.
Musk questions DeepSeek claims on computing power
Elon Musk joined those expressing scepticism about DeepSeek’s claim to have been launched with less than $6m worth of computing power from Nvidia H800 chips.
Scale AI chief executive Alexandr Wang said during an interview with CNBC on Thursday, without providing evidence, that DeepSeek has 50,000 Nvidia H100 chips.
He claimed this would not be disclosed because that would violate Washington’s export controls that ban such advanced AI chips from being sold to Chinese companies.
Mr Musk replied on X: “Obviously.”
DeepSeek did not immediately respond to a request for comment on the allegation.
‘Magnificent Seven’ stocks to announce results after tech rout
Four of the group of “Magnificent Seven” stocks that have powered gains on Wall Street in recent years are poised to announce annual results this week.
Microsoft, Meta and Tesla will reveal their fourth-quarter earnings after markets close on Wednesday in the wake of a brutal sell-off over fears that China AI startup DeepSeek will disrupt the sector.
Apple, which has been least impacted by today’s market panic, will report its results on Thursday.
Kenneth Lamont, principal at Morningstar, said: “With many investors heavily exposed to AI’s biggest players, disruption in the sector could ripple through portfolios.
“While DeepSeek itself isn’t publicly investable, one way to guard against such risks may be diversifying away from the so-called “Magnificent Seven” tech giants — perhaps by reallocating to equal-weighted strategies.
“This serves as a fresh reminder for thematic investors: mega-trends rarely unfold as expected, and today’s dominant players might not be tomorrow’s winners.”
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‘Sensitive’ markets still in strong position, says Deutsche Bank
Stock markets are “very sensitive” to potentially negative news, analysts have said, after the dramatic sell-off of global technology shares.
The Nasdaq 100 on Wall Street was down 3.7pc in premarket trading, with the S&P 500 lower by 2.1pc.
Deutsche Bank analyst Henry Allen flagged that the S&P 500 has not seen a 10pc correction since October 2023.
However, he also insisted stocks “look in a relatively strong position right now, all things considered”, pointing to the record high set by the S&P 500 last week.
He said: “Last summer also demonstrated that if economic data starts to soften, that could be a key catalyst for a correction.
“In particular, that combination of bad news on tech and broader economic data has the potential to cause big problems, as it’s worth remembering the bursting of the dot com bubble took place amidst a broader slowdown that culminated in a recession in 2001.
“Nevertheless, periodic sell-offs are a normal feature of markets, and as we look forward, several factors that could have caused issues in the recent past are now looking more positive, if anything.
“For instance, it’s been 18 months since the Fed last hiked rates, so we’re moving past the period where monetary policy lags would normally have their peak effect. Otherwise, the rally has been impressively resilient against the higher long-term borrowing costs of recent weeks.
“And economic growth itself remains robust, with no sign yet of the negative data surprises that preceded the turmoil last summer.”
UK stocks shielded from tech sell-off
The FTSE 100 has been insulated from the rapid sell-off in tech stocks after it hit a record high at the end of last week.
Britain’s flagship index was down 0.2pc to its lowest in a week but the losses were miniscule compared to the 3.9pc drop that the Nasdaq is on track to make at the opening bell.
The midcap FTSE 250 was down 0.6pc as it was dragged lower by its technology stocks, which have been hit by the rising popularity of Chinese AI app DeepSeek, which has raised questions about lofty valuations of tech giants on Wall Street.
Susannah Streeter of Hargreaves Lansdown added: “The make up of the FTSE 100 also offers resilience in an uncertain world, with pharma, consumer staples, and utility stocks offering the prospect of stable returns whatever the economic weather.”
Wall Street fear gauge rises amid tech sell-off
Wall Street’s so-called “fear gauge” has moved higher amid a sharp sell-off in tech stocks.
The Cboe Volatility Index has hit its highest level so far this year, has risen more than six points to 21.38.
David Morrison of Trade Nation said: “Investors have been forced to reconsider the outlook for capital expenditure and valuations given the threat of discount Chinese AI models.
“These appear to be as good, if not better, than US versions.”
Tech sell-off eases government borrowing costs
Treasury borrowing costs have fallen to their lowest level since the turn of the year as the sharp sell-off in tech stocks pushed investors towards safe haven assets.
The yield on 10-year UK gilts - a benchmark of government borrowing costs - has fall seven basis points today to 4.56pc as money moved out of tech companies and into the relative stability of sovereign-backed bonds.
Government bonds are considered a safe haven because the returns - the yield - are guaranteed by the state. The yield falls when there is greater demand as the government does not need to promise higher returns to attract buyers for its debt.
The fall in borrowing costs has wiped out the spike in yields earlier this month which triggered doubts about Rachel Reeves’s ability to meet her fiscal rules. It had threatened to wipe out her £10bn of fiscal headroom, which had been described by economists as “razor thin”.
The yield on 10-year US Treasury bonds plunged by 11 basis points to 4.5pc, its lowest level this year.
Deutsche Bank analyst Jim Reid said the drop in borrowing costs “shows how crucial a handful of US stocks are to global macro”.
Pointing to the 14pc plunge in Nvidia shares, he said: “This is a company that has gone from relative earnings obscurity to one of the most profitable in the world inside two years and the largest company in the world as of Friday night.
“The problem is that the AI industry is embryonic. And it’s almost impossible to know how it will develop or what competition current winners might face even if you fully believe in its potential to drive future productivity.
“The stratospheric rise of DeepSeek reminds us of this.”
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Nvidia down 12pc in premarket trading
It is becoming harder to keep track of how fast investors are dumping risky assets linked to the boom in artificial intelligence today.
Nvidia, the chip maker that has become the darling of the sector, has plunged 12pc in premarket trading.
Other chipmakers such as AMD and Micron Technology fell 5.3pc and 8.4pc, respectively.
Microsoft, which has backed ChatGPT maker OpenAI, is down 5.9pc
AI server makers Dell Technologies and Super Micro Computer slid 9.3pc and 10.9pc ahead of the opening bell in New York.
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DeepSeek pours cold water on AI ‘scaling laws’
The artificial intelligence market boom of the last two years has been built on the idea that building increasingly advanced systems will require companies such as OpenAI, Microsoft and Google to spend unprecedented sums on computer hardware such as Nvidia microchips and huge data centres.
“Scaling laws” - the idea that smarter AI will require more data and more spending - have become gospel in Silicon Valley.
It had made Nvidia the world’s most valuable company and created a halo effect around companies such as ASML, whose machines make the microchips.
The arrival of DeepSeek, a Chinese AI start-up, has appeared to pour cold water on that theory.
The company claims that it cost just $5.6m to train its latest V3 model, which offers similar performance to the best OpenAI and Google AI systems.
A new model released last week, R1, claims to contain so-called “reasoning” capabilities which experts see as a step towards human-level AI.
If the techniques DeepSeek used to develop its models spread into the rest of the AI world, it could lead to a sharp slowdown in spending on Nvidia chips and other hardware, which have been the picks and shovels of the current AI gold rush.
As Mizuho’s Jordan Rochester put it on Monday: “It fundamentally breaks the AI Capex narrative if true.”
Tech rout deepens on Wall Street
The Nasdaq has plummeted further ahead of the opening bell on Wall Street as the DeepSeek tech rout deepens.
The tech-focused index was down more than 5pc in premarket trading, while S&P 500 “futures” contracts were down 3pc.
Ben Barringer, technology analyst at Quilter Cheviot, said: “DeepSeek’s success will serve to intensify the US/China AI war, particularly following the recent announcement of the Stargate project in the US.
“It also provides a wake up call and somewhat of a question mark on how much needs to be spent in order to build a model, and whether quite the level of CapEx we have been seeing is really required.
“However, bringing the price of model training down is no bad thing as it will help to lower the entry point and this price elasticity could help drive usage and volume.”
True value of AI lies in data, says Salesforce boss
China chatbot DeepSeek is proving that the true value of AI is not in the user experience but in the data used to enhance it, the boss of US cloud software company Salesforce has said.
DeepSeek said it had taken just two months and less than $6m (£4.8m) to build a model more advanced than many of its Western competitors.
Tech stocks on track for $1 trillion wipe-out
DeepSeek’s new artificial intelligence chatbot has triggered market turmoil that could wipe more than $1 trillion (£799bn) off technology companies at the opening bell in New York later.
The Nasdaq 100 has tumbled 3.4pc in premarket trading, while contracts on the S&P 500 fell 2pc.
In Europe, tech stocks led market losses, with shares of chip equipment maker ASML down 11pc.
The Nasdaq 100 and Europe’s Stoxx 600 technology companies are together on track to take a hit of more than $1 trillion to their market valuations if the losses are confirmed at the opening bell on Wall Street this afternoon.
China’s lightning AI success should frighten Wall Street – and Trump
China has astonished the artificial intelligence community with a new model that runs at the fraction of the cost of American “frontier” models, writes Andrew Orlowski.
DeepSeek is almost as good too and it has published the source code, so everyone can download it and run it. Not for the first time, China appears to have copied someone else’s product, and can sell a much cheaper version.
The high profile venture capitalist Marc Andreessen called DeepSeek’s model “the most amazing and impressive breakthrough I’ve ever seen, and… a profound gift to the world”.
The New York Times quoted a Californian professor and entrepreneur saying that “the center of gravity of the open source community has been moving to China”, which he thought was “a huge worry”.
Read how Western hopes of winning the next technological revolution are being dashed.
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Nvidia down 10pc as DeepSeek to ‘put the cat among the pigeons’
AI poster child Nvidia dropped more than 10pc in premarket trading after the launch of DeepSeek’s AI Assistant.
Other chipmakers such as AMD and Micron Technology fell 4.5pc and 7.4pc, respectively.
AI server makers Dell Technologies and Super Micro Computer slid 7.8pc and 9.6pc ahead of the opening bell in New York.
Richard Hunter, head of markets at Interactive Investor, said: “It is far too early to describe DeepSeek as an existential threat to US-based AI solutions.
“It will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry which has powered much of the gain seen in the main indices over the past couple of years.”
Microsoft boss dismisses fears over China AI chatbot
The boss of Microsoft appeared to play down concerns about the emergence of China AI start-up DeepSeek, which has sparked a sell-off in US tech shares.
Satya Nadella said that as AI “gets more efficient and accessible, we will see its use skyrocket”.
He pointed to the economic theory known as Jevons paradox, which states that when technological progress improves efficiency, it actually leads to greater consumption of that resource, not less.
Users have been wowed by the roll-out of DeepSeek, a free assistant that its developers say uses lower-cost chips and less data.
Microsoft shares are down more than 4pc in premarket trading in New York amid suggestions that valuations of US tech stocks have become inflated as investors race to capitalise on the boom in AI.
DeepSeek triggers tech stock sell-off
Global markets have been rocked by the unveiling of DeepSeek’s new chatbot.
The Nasdaq 100 tumbled as much as 3.2pc in premarket trading, while contracts on the S&P 500 fell 1.9pc.
In Europe, tech stocks led market losses, with shares of chip equipment maker ASML down more than 8pc.
The pan-European Stoxx 600 was down 0.7pc. The FTSE 100 in London, which is less exposed to the tech sector, was down 0.2pc.
William Beavington of Jefferies said: “What’s particularly remarkable to us really is the cost effectiveness and the efficiency they have driven from the chips being used.”
Tech stocks plunge as China ‘delivers AI wake-up call’
Tech stocks have plunged around the world after a China AI start-up unveiled a new chatbot which threatens to match its major global competitors at a lower cost.
DeepSeek’s new artificial intelligence chatbot has soared to the top of the Apple Store’s download charts as it stunned industry insiders with its ability to match its US competitors.
The Nasdaq in New York plunged 3pc in premarket trading as DeepSeek said it had spent only $5.6m (£4.5m) developing its model - peanuts when compared with the billions US tech giants have poured into AI.
DeepSeek was developed by a start-up based in the eastern Chinese city of Hangzhou, known for its high density of tech firms.
Available as an app or on desktop, it can do many of the things that its Western competitors can do - write song lyrics, help work on a personal development plan, or even write a recipe for dinner based on what’s in the fridge.
Shares in major tech firms in the US and Japan have tumbled, with chip making giant Nvidia - the world’s dominant supplier of AI hardware and software - closing down more than 3pc on Wall Street on Friday and lower by another 8pc in premarket.
Japanese tech conglomerate SoftBank, a key investor in US President Donald Trump’s announcement of a new $500bn (£401bn) venture to build infrastructure for artificial intelligence in the United States, lost more than 8pm overnight.
Venture capitalist Marc Andreessen, a close advisor to Trump, described it as “AI’s Sputnik moment” - a reference to the Soviet satellite launch that sparked the Cold War space race.
Scale AI’s Wang wrote on X that DeepSeek “is a wake up call for America”.
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Good morning
Thanks for joining me. The world’s tech companies are being handed a “wake up call” after the unveiling of China’s new AI chatbot.
Deepseek has soared to the top of the Apple Store’s download charts, sending tech stocks plunging as its developers claimed it had been created with only $5.6m (£4.5m).
The Nasdaq in New York was down 3pc in premarket trading, with chip giant Nvidia on track to open 8pc lower.
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5) China’s lightning AI success should frighten Wall Street – and Trump | Western hopes of winning the next technological revolution are being dashed, writes Andrew Orlowski
What happened overnight
World shares were mostly lower after the disruption from Chinese artificial intelligence startup DeepSeek.
The open version of the AI reasoning-based model appears to require far less investment than other AI models, causing investors to sell technology shares in the US and Japan and to buy Chinese tech companies.
Hong Kong’s Hang Seng gained 0.7pc to 20,197.77, with shares in e-commerce giant Alibaba gaining 2.9pc while search enging company Baidu jumped 4.9pc.
The Shanghai Composite index fell, however, after a survey of manufacturers showed export orders in China dropping to a five-month low. It edged 0.1pc lower to 3,250.60.
The official manufacturing purchasing managers index fell to 49.1 in January from 50.1 in December, slipping into contractionary territory on a scale where 50 and above indicates expansion. New orders and construction PMIs also fell.
Tokyo’s Nikkei 225 gave up 0.9pc to 39,565.80, extending losses after the Bank of Japan raised its benchmark interest rate to 0.25pc, its highest level since 2008.
Computer chip-related shares saw big declines, with Tokyo Electron down 4.9pc and test equipment maker Advantest sinking 8.6pc.
In Bangkok, the SET fell 0.7pc. Markets were closed in Taiwan and South Korea.