For the past two years, investors have been speculating about what might dampen the rapid rise of AI stocks.
Recently, the answer could have come from China, as a new AI startup, DeepSeek, has introduced a competitor to ChatGPT. DeepSeek claims that its model is not only cheaper but may also surpass its US counterparts in some areas. The news has caused notable turbulence in the markets, with futures for the tech-heavy US Nasdaq Composite dropping 1.8% as investors weighed the potential impact of this new challenge.
DeepSeek’s entry into the AI market has raised concerns among investors, especially given its claims of cost-effectiveness despite relying on less advanced chips compared to some of the established US industry leaders. The news has contributed to a broader pullback in global equity markets, with European stock futures also slipping half a percent.
While the long-term viability of DeepSeek’s model remains uncertain, initial concerns are focused on whether US tech giants’ pricing power might be under threat. Companies like Nvidia, which are central to AI developments, could face competition from cheaper alternatives, potentially impacting their market valuations.
The timing of DeepSeek’s release coincides with earnings reports from key tech players—Apple, Microsoft, Meta, and Tesla—raising further questions about how these companies will defend their significant investments in AI. Traders will be watching closely to see how US tech giants respond to growing competition in the sector.
Beyond AI, other developments also influenced market sentiment this week. The ongoing trade tensions between the US and various countries, including the recent sanctions imposed on Colombia by President Donald Trump, added further uncertainty. Additionally, global currency markets have been volatile, with the offshore yuan weakening by 0.4% and the Mexican peso sliding as much as 1.2%.
