Tech stocks plummet as Chinese AI chatbot DeepSeek takes top spot in App Store

Tech stocks in the US took a hit as markets opened on Monday, following the emergence of a new Chinese competitor in the artificial intelligence boom, potentially shaking up the sector.

The S&P 500 dropped 1.8% in early trading on Monday, with major tech and AI-related stocks also experiencing a downturn, including Nvidia, which fell more than 10%, while Microsoft, Meta, Google parent company Alphabet and Amazon all opened lower.

The decline has been triggered by the sudden rise of Chinese AI chatbot app DeepSeek, which has rocketed to the top of the download charts on Apple’s App Store in the UK, US and China, prompting a reassessment of the AI sector landscape.

Until now, the US, home to OpenAI’s ChatGPT and Google’s Gemini, as well as many other leading tech firms working on AI technology, has been viewed as the unshakeable global leader in AI.

However, DeepSeek’s sudden emergence, and claims of performance on par with ChatGPT despite reportedly being developed for a fraction of the cost, is leading to a re-evaluation of the AI market. China’s access to the US-made advanced chips required to power the training of AI models has been limited since the US government strengthened restrictions on sales to China in 2021.

Consequently, Chinese AI companies have started to collaborate more openly and explore alternative methods of enhancing performance. This has led to the development of AI models that require significantly less computing power to operate, thereby reducing costs far beyond what was previously considered feasible.

This context has propelled DeepSeek’s ascension and sudden disruption of the sector’s landscape. The news coincides with a pivotal week for the industry, as several of Silicon Valley’s major firms are set to announce their latest financial results.

Meta and Microsoft’s figures are anticipated on Wednesday, followed by Apple’s on Thursday.