Tech Stocks Drop as Chinese AI Model DeepSeek Challenges U.S. Dominance

The Nasdaq took a hit on Monday, with futures dropping 3%, as concerns grew about a new artificial intelligence model from China called DeepSeek. This low-cost AI model has raised questions about the dominance of U.S. tech companies in the AI space, leading to a selloff in major tech stocks.

Nvidia shares fell 8.3% in early U.S. trading, and ASML Holding NV saw its biggest drop since October, sinking 9%. Other markets also showed weakness, with S&P 500 futures down 2% and Europe’s Stoxx 600 index slipping by 0.7%. The dollar gained strength, while Bitcoin fell below $100,000, dropping 5%.

What Is DeepSeek?

DeepSeek is a new AI model from China that’s grabbing attention for its ability to perform on par with top AI systems at a much lower cost. This has caused investors to worry about the high valuations of U.S. tech companies, especially those in the AI sector. Some analysts believe this could shake up the current business model of heavy research and development spending, which is common among Silicon Valley companies.

“The U.S. market’s heavy reliance on big tech stocks is becoming a risk,” said a market strategist.

Market Reactions

The selloff wasn’t limited to tech stocks. Emerging-market currencies, like the Mexican peso and South African rand, fell as the dollar grew stronger. U.S. Treasury yields also dropped, with the 10-year yield down to 4.55%.

The timing of this shakeup comes as tech giants like Apple, Microsoft, Meta, and Tesla are set to release earnings this week. These reports are expected to play a major role in shaping market sentiment.

Global Impact

The effects of DeepSeek’s launch are being felt around the world. In Europe, ASML, a major player in the chip industry, is facing pressure, and its performance this week is seen as critical for the region's tech sector. Other European companies, such as LVMH, SAP, and Shell, are also expected to release earnings this week, adding to the uncertainty.

Meanwhile, markets in Taiwan, South Korea, and Australia were closed for holidays, giving investors in those regions a temporary break from the turbulence.

Key Market Updates:

• Stocks: Nasdaq futures fell 3%, S&P 500 futures dropped 2%, and Europe’s Stoxx 600 was down 0.7%.

• Currencies: The dollar strengthened, with the Japanese yen rising 0.9% to 154.64 per dollar.

• Cryptocurrencies: Bitcoin dropped 5% to $99,330, and Ether fell 6.6% to $3,079.7.

• Bonds: U.S. 10-year Treasury yields declined to 4.55%, while Germany’s 10-year yield fell to 2.52%.

With the AI industry facing new competition and major earnings reports on the horizon, markets are bracing for a volatile week ahead.

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