Chinese AI Chatbot DeepSeek Disrupts US Tech Market, Triggering Stock Decline

DeepSeek, an AI-powered chatbot introduced just last week, has rapidly gained traction, surpassing competitors such as OpenAI’s ChatGPT to become the most downloaded free application in the United States.

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A newly released Chinese artificial intelligence (AI) chatbot has shaken up the US tech industry, causing significant stock declines for major technology firms.

DeepSeek, an AI-powered chatbot introduced just last week, has rapidly gained traction, surpassing competitors such as OpenAI’s ChatGPT to become the most downloaded free application in the United States.

The impact was immediate—shares of key American tech giants, including Nvidia, Microsoft, and Meta, suffered steep drops on Monday.

DeepSeek's Meteoric Rise and Growing Concerns

Amid its swift rise in popularity, DeepSeek's developers announced a temporary restriction on new user registrations, citing large-scale cyberattacks targeting the platform.

What sets DeepSeek apart is its reported development cost—a fraction of the billions invested by American AI firms. Analysts are now questioning the future of US dominance in the AI sector, especially in light of the massive investments planned by American companies.

Just last week, OpenAI joined several firms in a pledge to invest $500 billion in AI infrastructure within the US. President Donald Trump hailed the initiative as the most ambitious AI infrastructure project to date, emphasizing the importance of keeping technological advancements within the country.

DeepSeek operates on the DeepSeek-V3 model, an open-source system claimed to have been trained on a budget of roughly $6 million—a stark contrast to the heavy financial commitments made by its competitors. However, some experts have questioned these figures, pointing out that DeepSeek relies on existing technology and freely available open-source software.

US-China AI Competition Intensifies

DeepSeek’s rise comes at a time when the US has been tightening restrictions on the export of advanced AI-related chip technology to China. To counter these limitations, Chinese AI firms have turned to collaborative innovation and alternative computing strategies, resulting in models that require significantly less processing power and, consequently, lower costs.

This breakthrough has the potential to disrupt the industry’s financial landscape, as AI systems previously thought to require expensive infrastructure are now being developed at a fraction of the cost.

After the launch of DeepSeek-R1, the company claimed that its model delivers performance comparable to OpenAI’s advanced systems in areas like coding, mathematical problem-solving, and natural language reasoning.

Market Reaction and Economic Fallout

The sudden success of DeepSeek has rattled global stock markets, particularly in the US and Europe.

  • Nvidia, a leader in AI chip manufacturing, saw its shares plummet 16.9% by the close of Monday’s trading.
  • Broadcom, another key player in the sector, dropped 17.4%.
  • Microsoft and Alphabet (Google's parent company) also saw their stock values decrease by 2.14% and 4%, respectively.
  • In Europe, Dutch semiconductor firm ASML suffered a 7% decline, while Siemens Energy, which produces AI-related hardware, experienced a 20% plunge.

Fiona Cincotta, a senior market analyst at City Index, remarked that investors had not anticipated the emergence of a low-cost Chinese AI alternative. She noted that the shift could significantly impact the profitability of major US firms that have already committed billions to AI infrastructure.

Singapore-based technology advisor Vey-Sern Ling added that DeepSeek’s development could disrupt the entire AI investment landscape, challenging the current trajectory of the industry.

However, analysts from Citi Bank warned that, despite DeepSeek’s rapid ascent, Chinese AI firms still face substantial hurdles. The US maintains access to more advanced semiconductor technology, which could serve as a long-term competitive advantage.

DeepSeek Under Attack?

As its popularity soared, DeepSeek reported that it had been targeted by massive cyberattacks, forcing the company to temporarily pause new sign-ups to protect service stability. Existing users, however, remain unaffected.

“We are limiting registrations due to large-scale malicious attacks on our platform,” DeepSeek stated. “We appreciate our users’ understanding and support.”

Who is Behind DeepSeek?

DeepSeek was founded in 2023 by Liang Wenfeng, an entrepreneur based in Hangzhou, China. Liang, an electronic engineering graduate, also runs the hedge fund that financed the company’s development.

Reports suggest that he had amassed a significant stockpile of Nvidia A100 chips—a crucial AI component now banned for export to China. By pairing these high-end processors with less expensive alternatives still available for import, he was able to bring DeepSeek to life.

Recently, Liang was seen in discussions with Chinese Premier Li Qiang, signaling government interest in the company’s success.

In an interview last year, Liang expressed surprise at the market's reaction to DeepSeek’s pricing model.

“We didn’t expect affordability to become such a hot topic,” he said. “We were simply following our own projections, assessing costs, and setting fair prices accordingly.”

The Future of AI Competition

With DeepSeek’s rise and the ensuing market shake-up, the global AI race is intensifying. The emergence of a powerful, low-cost Chinese AI model raises fundamental questions about competition, innovation, and the future of AI leadership.

As the industry navigates this unexpected shift, investors and tech leaders will be watching closely to see how Silicon Valley and Washington respond to this challenge from China.