Chinese AI causes Silicon Valley stocks to tumble

28 February 2025 News

Chinese AI company DeepSeek recently released its AI model that caused shockwaves to ripple through the US tech community. Tech investor Marc Andreeson calls it “AI’s Sputnik moment”, referring to how Russia won the race against the USA when they launched their Sputnik satellite in 1957. Many stocks took a downward spike with Nvidia being the hardest hit losing 16,9% after one day’s trading.

This release comes hot on the heels of various US tech giants pledging to invest up to $500 billion in building AI infrastructure. US President Trump called it “the largest AI infrastructure project by far in history” that would keep the future of AI technology in the US. This now looks doubtful with the introduction of DeepSeek, a system with the same performance, but at a fraction of the cost that the US is spending.

DeepSeek is powered by the open source DeepSeek-V3 model, which its researchers claim was trained for around $6m. This comes on the back of US sanctions of AI technology to China. To continue their work without a supply of advanced chips from the US, Chinese researchers collaborated with each other, which has resulted in AI models that require far less computing power than used by existing models. When used for tasks in mathematics, coding, and natural language reasoning, DeepSeek has performance on par with OpenAI’s latest model.

Other companies hit hard by this news were Broadcom (-17,4%), Microsoft (-2,1%), Alphabet (-4%), ASML (-7%), and Siemens Energy (-20%).

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