A Chinese artificial intelligence startup’s latest AI model spooked markets Monday, leaving U.S. and European technology stocks on track for a $1 trillion wipeout, a week after President Donald Trump threw his weight behind a $500 billion private sector investment in AI infrastructure.
DeepSeek’s latest AI model topped Apple’s App Store charts over the weekend, challenging the dominance of Silicon Valley giants like ChatGPT maker OpenAI and leading to concerns that some of America’s largest publicly traded companies are overvalued.
The model’s emergence—which its developers claim was made for less than $6 million—also raised doubts about the hundreds of billions Sundar Pichai-led Alphabet, Mark Zuckerberg’s Meta, and Satya Nadella-led Microsoft plan to spend developing the technology.
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Chinese AI researchers have more widely shared their work—DeepSeek is an open-source model, meaning anyone can view, use, and modify its source code. And, because of U.S. sanctions disrupting their access to advanced semiconductor chips, developed AI models that require far less computing power.
Marc Andreessen, a tech entrepreneur who serves as an adviser to Trump, tweeted that DeepSeek’s new model is “AI’s Sputnik moment,” referring to the artificial Earth satellite launched by the Soviet Union in 1957 that took the United States by surprise and kicked off the space race.
The ripples of that Sputnik moment were felt acutely on European and U.S. stock markets.
California-based chip producer Nvidia—which soared to the most valuable company in the world amid market enthusiasm for AI and saw its $120 billion CEO Jensen Huang crack the ranks of the world’s 15 richest—fell 14 percent in mid-morning trading Monday, wiping away more than $300 billion in market capitalization.
Nasdaq 100 futures—which speculate on the future value of the technology-heavy index—fell nearly 4 percent in overnight trading.
Europe’s STOXX 600 technology index fell nearly 4 percent as of mid-afternoon trading and, along with the Nasdaq 100, was set for a combined $1.2 trillion rout if losses hold through the day.
Only a week earlier, Trump held a press availability at the White House where he hailed a $500 billion pact between OpenAI, software giant Oracle, and Japanese tech investor Softbank to develop AI infrastructure in the United States.
He was joined by OpenAI CEO Sam Altman, Oracle executive chairman Larry Ellison, and Softbank CEO Masayoshi Son. Altman subsequently lavished Trump with praise in a post on X, saying he thinks “he will be incredible for the country.”
Trump used the opportunity to boast that their private sector partnership was “a resounding declaration of confidence in America’s potential under a new president.”
Markets did not offer them a vote of confidence Monday.
Softbank’s Tokyo-listed shares fell 8.3 percent, while in New York, Oracle shares had fallen 8 percent in mid-morning trading. OpenAI is a privately held company so its shares don’t trade on public markets.
The correction, meanwhile, echoes caution issued by a handful of prominent Wall Street leaders in recent months. JP Morgan CEO Jamie Dimon and Goldman Sachs CEO David Solomon have both suggested U.S. stock markets, coming off two years of jumbo growth, were overvalued.
DeepSeek’s latest model has been assessed as on par with the latest offerings from OpenAI and Meta. Andreessen called it “one of the most amazing and impressive breakthroughs.”
This week will prove a major test for blue chip tech companies: On Wednesday, Meta, Microsoft, Tesla, and IBM will report their latest results and on Thursday, Apple and Intel will follow.
The Federal Reserve is also slated to make its first rate decision under Trump on Wednesday.
