Major tech stocks including NVIDIA, Microsoft, Meta and Tesla tumbled in premarket trading on concerns that a Chinese artificial intelligence startup could threaten America’s dominance in AI.
Shares of NVIDIA fell nearly 12% on news reports about the capabilities of China-based startup Deepseek-A, which has made waves in the industry since launching a free, open-source model in December .
Deepseek was reportedly developed in just two months at a cost of under $6 million.
The development triggered a global sell-off, particularly affecting semiconductor firms, as prices mounted on the durability of US dominance in the sector.
Shares of NVIDIA, a major player in AI-driven chip design and a significant beneficiary of the AI boom, fell 11.8% as of 7:05 a.m. Eastern before the market opened on Monday.
Microsoft, which has plowed billions of dollars into Sam Altman’s Openai, the company behind Chatgpt, was off 4.1% in early trading. Meta shares were off 1.7% while Tesla saw its share price fall more than 2.7% in premarket trading.
European chipmakers also faced sharp declines, with Netherlands-based ASML and ASM International falling 8.9% and 13.6% respectively.
Meanwhile, NASDAQ futures fell 2.3%, S&P 500 futures fell 1.3% and Dow Jones industrial average futures were down 0.9% before the opening bell on Monday.
Deepseek’s rapid progress has raised scrutiny over the extraordinary sums being poured into AI research by major US firms, raising questions about efficiency and cost-effectiveness.
“Deepseek clearly does not have access to as many computers as US hyperscalers and somehow managed to develop a model that looks very competitive,” said Srini Pajjuri, a semiconductor analyst at Raymond James, in a note to Worlday.
Meanwhile, analysts at QUIT acknowledge that Deepseek’s technological advances have raised investor questions about the cost of the computer.
However, they point out that American companies still hold a significant second advantage for their access to more sophisticated chips.
“While the US companies’ dominance of the most advanced AI models could potentially be challenged, their access to high-end GPUs remains a key differentiator,” analysts were quoted as saying in a note.
The market turmoil coincides with a broader push by the US government to strengthen AI leadership.
President Trump recently announced a $500 billion AI initiative known as Stargate.
The large amount of money being invested in the project, which includes the involvement of top firms such as Openai, Oracle and SoftBank, underscores the strategic importance of advanced chips in maintaining American competitiveness in AI development.
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