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DeepSeek causes top AI stocks to tumble as Trump warns US companies

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Prominent US blue-chip stocks tumbled sharply on Monday, with the Nasdaq composite plunging just over 3 percent and the S&P 500 shedding 1.46 percent as per CNBC, with the fall attributed to the remarkable emergence of the China-based AI chatbot DeepSeek.

Front facing facade of the New York Stock Exchange, April 15, 2024. /CFP
Front facing facade of the New York Stock Exchange, April 15, 2024. /CFP

Front facing facade of the New York Stock Exchange, April 15, 2024. /CFP

AI-related technology company shares fell sharply, with Broadcom and AMD falling 17 and 6 percent respectively. Perhaps most tellingly, US chip giant Nvidia's shares plunged by nearly 17 percent, losing close to $600 billion in market value in a single day.

The current market volatility follows hot on the heels of Chinese-developed AI DeepSeek becoming the most downloaded application on Apple's US app store. First developed by a Hangzhou-based company of the same name in 2023, it is a free open source large language model (LLM), built using lower capability chips from Nvidia called H800s. The lower cost attributed to the development and training of DeepSeek, reported in the range of $6 million by CNBC, is contrary to the prevailing belief about the significant investments in computing required for this purpose.

In response to the stock price drop, a spokesperson for Nvidia told Bloomberg that DeepSeek is an "excellent AI advancement", highlighting how a company can create new AI models, while leveraging those which are already widely-available.

DeepSeek was also trained on Nvidia chips, albeit the older H800s rather than the top-of-the-range chips US AI companies are assembling in the thousands at vast AI datacenters. /CFP
DeepSeek was also trained on Nvidia chips, albeit the older H800s rather than the top-of-the-range chips US AI companies are assembling in the thousands at vast AI datacenters. /CFP

DeepSeek was also trained on Nvidia chips, albeit the older H800s rather than the top-of-the-range chips US AI companies are assembling in the thousands at vast AI datacenters. /CFP

Speaking to House Republicans on Monday, US President Donald Trump called the news of DeepSeek "positive", noting how it shows such progress can be achieved at a lower cost. However, Trump also used the opportunity to motivate American competitiveness in the space, calling the development "a wake-up call for our industries that we need to be laser focused on competing to win". 

US President Donald Trump speaking at the US House Republican Members Conference Dinner in Doral, Florida, on January 27, 2025. /CFP
US President Donald Trump speaking at the US House Republican Members Conference Dinner in Doral, Florida, on January 27, 2025. /CFP

US President Donald Trump speaking at the US House Republican Members Conference Dinner in Doral, Florida, on January 27, 2025. /CFP

Key voices in the financial sector share similar sentiments. In response to the recent fluctuations in the exchange, Nasdaq Vice Chairman John McCoy told China Media Group that "AI will continue to be one of the most important revolutions", adding that "DeepSeek is going to be an important aspect of that."

Industry insiders generally believe the success of DeepSeek marks a new height in China's large model technology. Meanwhile, it also shows the United States is gradually losing its dominance in the field of advanced AI. They call on countries to work together to develop advanced AI for the common good of the world.

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