Nasdaq Set to Open Down as Tech Stocks Dive on DeepSeek AI Fears
A Chinese start-up’s new artificial intelligence program took the top spot in Apple’s app store, threatening U.S. dominance in the field and huge investments from companies in the new technology. Stock futures were falling sharply Monday.
DeepSeek introduced a new free assistant on Jan. 20 that competes with Microsoft-backed OpenAI’s ChatGPT and others. It has quickly soared in popularity. Not only is it cheaper to use than rivals, it also uses less expensive chips and less data.
The program’s quick success challenges long-held assumptions that AI demands huge investments for firms to take advantage of it, and the idea that U.S. companies will lead the way in development. That’s a huge blow to technology stocks that have been riding the wave of AI optimism for the past few years.
Louis Gave of Gavekal Research called it a “Sputnik Moment,” referring to the Soviet Union’s launch of the first man-made satellite in 1957 that shook U.S. confidence in its technological superiority.
“China’s launch of its new DeepSeek large language model at a fraction of the cost of comparable U.S. AI solutions calls into question a whole raft of the beliefs that have underpinned the bull market in U.S. growth stocks,” Gave said. The news is “potentially leaving the AI bubble facing its dot-com moment,” suggesting a crash in tech stocks comparable to the one experienced in the early 2000s could be in store.
Futures for the Dow Jones Industrial Average lost 463 points, or 1.1%. Contracts tied to the S&P 500 were down 2%, while futures for the tech-heavy Nasdaq dropped 3.1% before the market opened.
Other news that could be affecting stocks on Monday include President Donald Trump’s standoff with Colombia this weekend over deportations of immigrants and trade tariffs.
Later this week, the Federal Reserve is expected to keep interest rates unchanged after lowering borrowing costs by a percentage point since September.
Bond yields were lower. The yield on the 10-year Treasury was at 4.549%, down from more than 4.6% on Friday. The two-year yield fell to 4.216% from higher than 4.3% last week.