The Nasdaq fell like a stone on Monday as technology stocks, which have been inflated over the past year by the promise of artificial intelligence, fell. The catalyst was Chinese company DeepSeek, which last week rolled out a product similar to the US AI giants but using less powerful and much cheaper chips.
DeepSeek claims it spent $5.6 million to train its latest model that rivals OpenAI’s ChatGPT and Meta’s Llama and wasn’t. 1 on the Apple App Store over the weekend. This wreaked havoc on the Nasdaq technology index, which fell more than 3% in mid-afternoon trading, as investors feared increased competition risks even as US players spend billions on investing in artificial intelligence.
Just last week, President Donald Trump unveiled Stargate, a private sector initiative involving OpenAI, Oracle, and SoftBank to build AI infrastructure in the United States, with spending amounting to $500 billion.
Dominant chipmaker Nvidia bore the brunt of the selling, down 16%. Other chip manufacturers, such as Broadcom and Advanced Micro Devices, declined by 17% and 6%, respectively.
OpenAI investor Microsoft fell 4%, Alphabet fell 3%, and Amazon fell 1% as the tech sell-off continued. Shares of Apple, which has not been a big investor in artificial intelligence, rose 3%. Meta bucked the trend and rose as investors expect strong numbers when Mark Zuckerberg’s company kicks off tech earnings on Wednesday.
Other markets followed the Nasdaq’s lead lower, with the S&P 5oo down 1.7% and the Dow Jones Industrial Average down 120 points.
Analysts were divided. Some acknowledge the potential risk that DeepSeek could develop a competitive model on the cheap — though many question the $5.6 million figure as too low. Others see the sell-off as exaggerated and a buying opportunity.
“On a handful of times over the past few years, there have been big sell-offs in technology that were golden buying opportunities…and today is another one of them in our view,” wrote Dan Ives of Wedbush Securities. He called DeepSeek’s model “impressive” but said the reality is that American technology is focused on a broader endgame “with all the infrastructure and ecosystem that China and especially DeepSeek can’t get close to,” which is driving an estimated $2 trillion in cumulative resources. Capital spending over the next three years.
