‘Cheaper than ChatGPT’: How DeepSeek Is Causing Mayhem in US Markets

A major disruption is shaking up the tech world! DeepSeek, a Chinese AI startup, has surged to the top of the US Apple App Store charts, overtaking ChatGPT as the most downloaded free app. Promising cutting-edge performance at a fraction of the cost, DeepSeek is challenging the dominance of Silicon Valley’s biggest players. With stocks in Nvidia, Microsoft, and Meta slipping, the rise of this low-cost competitor has raised critical questions about the future of AI innovation and US tech supremacy.

Is this a turning point in the global AI race? 

Join us as we break down the fallout in the US Markets and expert reactions to this groundbreaking development.

What Happened?

Monday morning brought a significant shake-up to the markets as DeepSeek, a Chinese AI startup, made its presence felt. Following its rapid rise, the ripple effects hit major U.S. tech stocks hard. Nvidia shares dropped by around 17%, Microsoft fell over 3%, and Meta also recorded substantial losses.

While trading the Dow Jones index was not severely affected as it stayed close with a gain of approximately 0.7%, those who trade the NASDAQ index, heavily weighted toward technology companies, noticed it slid nearly 3%, while those who trade the S&P 500 index similarly noticed a 1.7% decline. Investors were forced to reassess their strategies as DeepSeek’s low-cost AI model directly challenged the sustainability of Silicon Valley’s high investment approach, as well as recent investments like President Donald Trump’s proudly endorsed $100 billion StarGate initiative. With DeepSeek’s reported ability to deliver competitive performance at a fraction of the cost, DeepSeek is challenging the foundation of US tech dominance.

Chipmakers like ASML and Broadcom also faced steep losses, reflecting fears that DeepSeek’s innovation could shift demand away from advanced hardware. Meanwhile, safe-haven assets like Treasury bonds saw an influx, as yields fell and uncertainty in the US markets grew.

DeepSeek has now emerged as a market disruptor. But what exactly is it?

What is DeepSeek?

DeepSeek is an AI startup from Hangzhou, China. DeepSeek has rapidly gained attention for its models, including the latest DeepSeek-R1, deliver high-performance results while being cost-efficient, using less advanced hardware than competitors like ChatGPT.

What truly sets DeepSeek apart is its ability to achieve cutting-edge performance at just $5.5 million in development costs—dramatically undercutting industry norms, which often range between $100 million and $1 billion for advanced AI models like ChatGPT. By leveraging open-source technology and Nvidia’s H800 chips, DeepSeek is proving that impactful AI innovation doesn’t have to come with a billion-dollar price tag.

Who owns DeepSeek?

DeepSeek was founded in 2023 by Liang Wenfeng, backed by High-Flyer, the quantitative hedge fund he co-founded in 2015. Armed with a background in electronic engineering and finance, Wenfeng laid the foundation for the company’s meteoric rise.

Before the Biden administration’s October 2022 sanctions restricted exports of advanced chips like Nvidia’s A100 GPUs, Wengfeng made a game-changing move—stockpiling an estimated 50,000 of these chips paired with affordable hardware that rival Silicon Valley’s best.

The result? The tech-led downturn that unfolded yesterday.

Market meltdown

Global markets faced a significant downturn on Monday as tech stocks experienced one of their worst days in recent history. AI-darling NVIDIA bore the brunt of the selloff, with shares plunging 17%, erasing nearly $600 billion in market value—setting a record for the largest single-day loss in U.S. stock market history. Broadcom followed closely, falling 17.4%, with Microsoft, Meta, and Alphabet also posting substantial losses.

The ripple effects were felt globally. In Europe, Dutch chipmaker ASML dropped 7%, and in Asia, Japan's SoftBank slid more than 8%. The Philadelphia Semiconductor Index plummeted 9.2%, its steepest drop since March 2020.

Energy stocks, which had surged on AI-related demand, also reversed course. Constellation Energy fell 21%, and Vistra dropped 28%, while cryptocurrencies, including Bitcoin, saw significant declines.

As uncertainty gripped the markets, investors turned to safe-haven assets. Treasury yields dropped 12 basis points to 4.50%, while the yen and Swiss franc strengthened. The day’s events underscored the fragility of tech valuations, leaving traders and analysts bracing for further volatility in the days to come.

Real-time reactions

DeepSeek’s disruptive debut sent shockwaves through markets and boardrooms alike, leaving investors and tech leaders scrambling. Marc Andreessen, an outspoken Silicon Valley venture capitalist, declared it ‘AI’s Sputnik moment’, likening the Chinese chatbot’s launch to the Soviet Union’s game-changing satellite launch in 1957. ‘This is one of the most jaw-dropping breakthroughs I’ve ever seen,’ he raved on X, hailing DeepSeek’s audacious leap past Silicon Valley’s heavyweights.

Similarly, US President Trump, took the moment as a call to arms for US industries, calling DeepSeek’s rise a ‘wake-up call’ and urging American tech giants to rethink their strategies. ‘This proves we need to stay laser-focused to win’, he stated in a fiery address.

Meanwhile, Fiona Cincotta, a senior market analyst, captured the widespread anxiety: ‘DeepSeek has blindsided the market. The idea of a budget-friendly AI alternative wasn’t even on the horizon—and now it’s shaking the foundations of trillion-dollar investments.’

But the celebration is not universal. Skepticism is still palpable, with seasoned analyst Gene Munster casting doubt on DeepSeek’s astonishing claims. ‘A $6 million model competing with billion-dollar giants? Either it’s a miracle, or there’s more to the story’, Munster warned, urging caution amidst the hype.

Nevertheless, the message is clear: the rules of the AI game have changed overnight!