U.S. tech companies plunged into premarket trading as Chinese startup Deepseek sparked competitive concerns in AI and America's leadership in the sector, sparking a global sell-off.
Chip Designer Shares NvidiaAND A huge beneficiary of the AI hypedown 9.84% at 05:11 ET pre-open. Dutch chip companies Asml AND ASM International dropped 10.59% and 14.94% respectively in European trade, while in Asia, Japanese chip-related stocks were broadly lower.
DeepSeek launched a free, open-source, big-language model in late December, saying it was developed in just two months at a cost of less than $6 million – a much lower cost than that required by Western counterparts. Last week, the company released a reasoning model that also apparently it has surpassed itself Last Openai in many third-party tests.
The development has split questions about how much big tech companies are investing in AI models and data centers.
“Deepseek clearly doesn't have access to as much computation as we hyperscavers and has somehow managed to develop a model that appears highly competitive,” Srini Pajjuri, a semiconductor analyst at Raymond James, said in a note.
– CNBC's Lee Ying Shan and Michael Bloom contributed to this story.
This breaking news is updated.