Stock Market Updates: Nvidia, Meta Microsoft Hit by Fears Over Chinese AI Rivals

Losses accelerate as Nvidia drops 17% amid DeepSeek AI concerns

Losses deepened on Monday as Nvidia (NVDA), a key player in the AI sector, saw a dramatic 17% drop, leading a broader market sell-off. The downturn was sparked by concerns over a new AI model from Chinese startup DeepSeek, which raised questions about the future of AI investment and the emergence of more cost-efficient artificial intelligence technologies.

DeepSeek, which unveiled its latest AI model on January 20, has been seen as a direct competitor to OpenAI, with some industry experts already praising its capabilities. American venture capitalist Marc Andreessen called the new AI model “one of the most amazing and impressive breakthroughs I’ve ever seen.”

The release came just a month after DeepSeek announced that training its latest AI model cost a fraction of what OpenAI spent on its GPT model. DeepSeek’s training costs amounted to just $5.6 million, compared to the more than $100 million spent on OpenAI’s GPT, raising concerns about the financial viability of AI investments moving forward.

Dow briefly turns positive before slipping as AI-linked stocks drag

The Dow Jones Industrial Average briefly rallied to breakeven on Monday morning before dropping 50 points, as the broader market continued to face pressure. The S&P 500 fell 1.4%, and the Nasdaq Composite saw a larger drop of 2.3%.

The Dow has held up better than other indexes, largely due to its lack of exposure to key stocks tied to the AI trade. While only nine of the 30 Dow stocks declined, significant drops from Nvidia, Caterpillar, and Microsoft weighed on the index. Nvidia, down 13%, accounted for 112 points of the Dow’s loss, while Caterpillar contributed 92 points, and Microsoft’s 2.8% decline took away 79 points.

The selloff in AI-linked stocks comes after the rise of DeepSeek, a Chinese AI startup that has drawn attention for offering a competitive, lower-cost alternative to Microsoft-backed OpenAI’s ChatGPT. This shift is prompting traders to question the high expectations placed on semiconductor and utility firms to benefit from the AI boom. Some analysts, like Roth’s Rohit Kulkarni, suggest that U.S. companies may have overestimated the unlimited capital available for AI growth, leading to increased scrutiny in 2025.

DeepSeek: Hangzhou startup backed by hedge fund co-founder makes waves in AI

DeepSeek, a Hangzhou-based startup, is attracting significant attention in the AI industry. The company’s controlling shareholder is Liang Wenfeng, the co-founder of High-Flyer, a quantitative hedge fund based in China. According to Chinese corporate records, High-Flyer announced in March 2023 that it was shifting focus from trading to building an independent research group dedicated to exploring Artificial General Intelligence (AGI). DeepSeek was founded later that year.

AGI, as defined by OpenAI, refers to autonomous systems that outperform humans in most economically valuable tasks. Although it’s unclear how much High-Flyer has invested in DeepSeek, the hedge fund’s presence in the same office building as DeepSeek and ownership of patents related to AI chip clusters suggest a close partnership. High-Flyer’s AI unit reported owning a cluster of 10,000 A100 chips as of July 2022, further solidifying its commitment to advancing AI technology.

Chinese startup DeepSeek’s AI models challenge U.S. tech dominance

Chinese startup DeepSeek has sparked a shake-up in the AI industry with the launch of its latest models, which it claims rival or exceed the performance of leading U.S. models at a fraction of the cost. DeepSeek’s AI Assistant, powered by its DeepSeek-V3 model, has already overtaken ChatGPT as the top-rated free app on the U.S. Apple App Store, furthering its impact.

The company gained significant attention when it revealed that training DeepSeek-V3 required under $6 million in computing power, utilizing Nvidia’s H800 chips. This announcement has raised questions about the vast investments U.S. tech companies are making in AI, especially as shares of industry giants like Nvidia have seen declines. DeepSeek’s rise threatens to disrupt the global technology landscape, challenging the dominance of U.S. firms in the field.

Nvidia faces largest daily decline in years amid AI concerns

Nvidia is set to experience its biggest daily drop in nearly five years, as shares of the artificial intelligence leader plunged more than 13% in morning trading.

The sharp decline follows concerns about DeepSeek, a Chinese startup’s large language model, which has sparked a global sell-off in tech stocks.

If the drop holds, Monday will mark Nvidia’s worst day since March 2020, when the stock fell 18.5% in a single session.

AI stocks weigh on S&P 500 despite broad market strength

The stock market showed mixed results on Monday, with the S&P 500 down 1.7% despite 324 members rising. The selloff was largely driven by a decline in stocks tied to the artificial intelligence sector, with the tech-heavy index hit hard.

Apple was the only member of the Magnificent Seven group to post gains, even though analysts had recently questioned its AI investments. Bespoke Investment Group’s Paul Hickey noted that Apple’s reluctance to invest heavily in AI, once seen as a drawback, was now viewed positively in light of the market’s recent shift.

In contrast, the other six members of the Magnificent Seven—including Meta Platforms, Tesla, Amazon, Alphabet, Microsoft, and Nvidia—experienced notable losses. Nvidia saw the steepest drop, plunging nearly 11%, while the iShares Semiconductor ETF fell 5.3%. The selloff was further exacerbated by concerns surrounding DeepSeek, a Chinese AI firm whose low-cost model has raised doubts about the future demand for U.S. AI chips and data center energy.

Nasdaq 100 drops as AI fears grow, DeepSeek sparks tech sell-off

More than 80% of stocks in the Nasdaq 100 retreated in Monday’s premarket, highlighting a significant downturn in tech stocks. The index fell over 4%, with key players like Marvell Technology, Broadcom, Constellation Energy, and Nvidia each suffering losses of more than 11%.

The drop comes amid growing concerns over a potential stock bubble tied to artificial intelligence. The catalyst for the sell-off is the recent success of DeepSeek, a Chinese AI startup that has raised questions about the sector’s future investment needs.

Investors are becoming increasingly cautious, wary that the rapid advancements in AI could destabilize the market and hinder further growth.

Chinese DeepSeek AI overtakes ChatGPT on US App Store

Chinese startup DeepSeek overtook ChatGPT to become the top-rated free application on Apple‘s App Store in the U.S. on Monday.

DeepSeek, a Chinese artificial intelligence tool, has become one of the most popular apps in the U.S., beating the chatbot from American firm OpenAI.

Newsweek contacted DeepSeek for comment on this story via email.

OpenAI CEO Sam Altman has previously warned against Chinese control over the future of AI.

President Donald Trump recently announced the launch of Stargate, a Texas-based initiative that combines some of the leading figures in artificial intelligence in an attempt to keep the industry under U.S. control. Altman will play a major role in Stargate.

Newsweek contacted the White House via email on Monday for comment.

Read the full story by Theo Burman on Newsweek.