Mon Jan 27 17:00:00 UTC 2025: ## Chinese AI Startup DeepSeek Shakes US Tech Stocks

**New York, NY (CNN) –** A surprise breakthrough from a little-known Chinese AI company sent shockwaves through US stock markets Monday. DeepSeek, a one-year-old startup, unveiled its ChatGPT rival, R1, boasting comparable capabilities at a fraction of the cost of US counterparts. The S&P 500 fell 1.4%, the Nasdaq plunged 2.3%, while the Dow remained relatively unchanged.

DeepSeek claims to have developed its base model for a mere $5.6 million, compared to the hundreds of millions or billions spent by US tech giants like OpenAI, Google, and Meta. This revelation sparked a sell-off, particularly impacting tech stocks heavily reliant on expensive AI infrastructure.

Nvidia, a leading AI chip supplier, saw its stock plummet 12%, while Meta and Alphabet (Google’s parent company) also experienced significant drops. Other tech companies involved in AI infrastructure, including Marvell, Broadcom, Micron, TSMC, and data center companies, suffered substantial losses. The broader market was impacted, as tech constitutes approximately 45% of the S&P 500.

The news also triggered a decline in energy companies, which have benefited from the increased electricity demand of AI data centers. Constellation Energy, Vistra, and GE Vernova all saw double-digit percentage drops. Even Bitcoin and other cryptocurrencies fell.

Analysts are divided on the long-term implications. While some believe the market overreacted, citing DeepSeek’s relative unproven nature and the possibility that the reported cost is inaccurate, others point to investor concerns about the dominance of US AI companies and the potential for overspending in the sector. The upcoming earnings reports from major tech companies will provide further insights into the market’s response to DeepSeek’s challenge. The event has, however, reignited interest in undervalued Chinese AI companies.

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