US stocks experienced a significant drop on Monday morning following a surprising development from a Chinese artificial intelligence company, DeepSeek, which posed a challenge to the dominance of America's technology industry. DeepSeek, a young startup, unveiled an AI model named R1, similar to ChatGPT, boasting familiar capabilities at a fraction of the cost of established US AI models. The company's claim of spending only $5.6 million on computing power for its base model, in contrast to the billions typically invested by US firms, rattled the markets, particularly the tech sector.
The S&P 500 declined by 1.4%, while the Nasdaq, heavily weighted with tech stocks, plummeted by 2.3%. Meta, OpenAI, and Google's parent company, Alphabet, all saw sharp declines in their stock prices. Nvidia, a leading AI chip supplier, witnessed a 12% drop, impacting related companies like Marvell, Broadcom, and Micron.
