Big tech stocks including NVIDIA, Microsoft, Meta and Tesla fell 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 Deepseek—a China-based startup that 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 — a stark contrast to the billions of dollars typically spent by Western tech giants on AI research and infrastructure.
The developments triggered a global sell-off, particularly affecting semiconductor firms, as fears mounted over 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 doesn’t have access to as many accounts as US hyperscalers and somehow managed to develop a model that looks very competitive,” Srini Pajjuri, a semiconductor analyst at Raymond James, said in a note on Monday.
Meanwhile, analysts at Citi acknowledge that Deepseek’s technological advances have raised investor questions about the cost of computing power.
However, they point out that US companies still hold a significant advantage due to their access to more sophisticated chips.
“While US companies’ dominance of the most advanced AI models could potentially be challenged, their access to high-end GPUs remains a key differentiator,” Citi analysts said 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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