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U.S. Tech Stocks Stumble Amid AI Competitiveness Concerns from Chinese Startup

In premarket trading, U.S. technology stocks experienced a sharp decline following the emergence of Chinese startup DeepSeek, which has raised alarms regarding the overall competitiveness of artificial intelligence (AI) development in the United States and its position within the global tech landscape.

Notably, shares of Nvidia, a prominent player in the AI chip sector, plummeted by 9.84% as investors reacted to the news at 05:11 a.m. ET prior to the official market opening. Meanwhile, European chip manufacturers ASML and ASM International saw their stock values drop significantly, falling 10.59% and 14.94% respectively. Asian markets also reported a downturn, with Japanese chip-related stocks reflecting the unease permeating the sector.

DeepSeek’s recent introduction of a free, open-source large-language model, launched in late December, is at the center of these market fluctuations. The startup claims that its model was developed within a mere two months and at a cost of less than $6 million, a stark contrast to the much larger investments typically required by Western technology firms. Just last week, DeepSeek also unveiled a reasoning model that has been reported to perform better than OpenAI’s latest offerings in several independent assessments.

These developments have prompted scrutiny regarding the substantial financial commitments made by large technology companies in AI model development and data center infrastructure.

Srini Pajjuri, a semiconductor analyst at Raymond James, highlighted the situation in a recent note, stating, “DeepSeek clearly doesn’t have access to as much compute power as U.S. hyperscalers yet has managed to develop a model that appears highly competitive.” This assertion raises further questions about the future trajectory of AI innovations and the relative capabilities of U.S. tech giants.

Impact on Asian Markets

The ripple effects of DeepSeek’s competitive advancements are being felt across Asian technology firms, particularly in Japan, where chip stocks are seeing notable declines. The apprehension surrounding the challenges to U.S. AI supremacy is influencing investor sentiment and market dynamics throughout the region.

— CNBC’s Lee Ying Shan and Michael Bloom contributed to this story.

This breaking news story is being updated.

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