China AI Chatbot DeepSeek Rattles Global Tech Markets, Challenging US AI Dominance

Global technology markets have been shaken by the emergence of DeepSeek, a Chinese chatbot rival to OpenAI’s ChatGPT. Known for its efficiency and affordability, DeepSeek has rattled confidence in the sustainability of the US-led artificial intelligence boom, resulting in a significant downturn for tech shares across Asia, Europe, and the United States.
Over the weekend, DeepSeek’s AI assistant surged to the top of the Apple App Store in the US and UK, surpassing OpenAI’s ChatGPT. This rapid ascent has sent ripples through the global AI industry, leading investors to question the long-term dominance of US tech giants in this burgeoning sector.
The Rise of DeepSeek
DeepSeek has proven to be a disruptive force. Founded in 2023 by Chinese entrepreneur Liang Wenfeng, the company is based in Hangzhou and operates with a research focus. Its primary goal is to make artificial intelligence affordable and accessible. Unlike other AI giants pursuing commercial dominance, DeepSeek openly provides its assistant and underlying code for free.
The company leveraged bespoke algorithms and reduced-capability H800 chips produced by Nvidia, spending less than £4.8 million to develop its models. This approach challenges the need for multi-billion-dollar infrastructure investments that many US tech companies have relied upon to fuel their AI growth.
Liang, who also manages High-Flyer Capital, a hedge fund employing AI to identify patterns in stock prices, began developing AI models as a hobby in 2021. Remarkably, DeepSeek’s R1 model is already outperforming OpenAI’s o1-mini and besting models from tech behemoths like Google, Meta and Anthropic, according to Artificial Analysis research.
Impact on Global Tech Shares
DeepSeek’s emergence as a significant competitor has reverberated through global stock markets. On Monday morning, the pan-European Stoxx 600 experienced a loss of 0.75%, while technology stocks tumbled 4.5%. Key players such as Dutch chipmaker ASML fell 8.2%, Siemens Energy dropped 4.1%, and Schneider Electric lost 6.8%.
The shockwaves extended to Asia, where Japanese chip companies Disco and Advantest, which supply Nvidia, saw losses of 1.8% and 8.6%, respectively. Pre-market trading in the US reflected similar unease; Nasdaq 100 futures were down 2.6%, and S&P 500 futures declined 1.4%.
Notably, Nvidia’s shares plummeted by over 11% in pre-market activity. These developments highlight growing investor concerns about the long-term feasibility of the AI sector’s existing business models.
DeepSeek’s Efficiency Challenges AI Spending
One of DeepSeek’s most striking differentiators is its cost efficiency. By using H800 chips—developed by Nvidia for the Chinese market following US sanctions restricting the export of more advanced H100 chips—and bespoke algorithms, DeepSeek demonstrated that high-performing AI models can be built at a fraction of the cost.
This breakthrough calls into question the sustainability of the massive capital investments previously deemed necessary to advance AI technology. Liang’s statement that the gap between US and Chinese AI capabilities has narrowed to just one to two years further underscores the rising competitiveness of Chinese technology on a global scale.
Marc Andreessen, a leading US venture capitalist, compared DeepSeek’s launch to the “Sputnik moment” of the US-USSR space race, highlighting the broader implications of this development for technological leadership and geopolitical dynamics.
The AI Sector Faces Re-evaluation
Richard Hunter, Head of Markets at Interactive Investor, commented on the situation, stating, “This will almost certainly put the cat among the pigeons as investors scramble to assess the potential damage it could have on a burgeoning industry which has powered much of the gain seen in the main indices over the last couple of years. The larger question has suddenly become whether the hundreds of billions of dollars invested in AI need re-evaluation.”
DeepSeek’s emergence also raises critical questions about the effectiveness of the US’s strategy to curb China’s tech ambitions. By successfully building a competitive AI model without access to state-of-the-art US technology, DeepSeek has revealed vulnerabilities in Washington’s export control measures.
DeepSeek Fuels AI Power Shift and Innovation
The global AI landscape is at a critical juncture. DeepSeek’s success signals a shift in the balance of power, challenging the dominance of US-based tech giants and potentially reshaping the investment strategies of companies and venture capitalists alike.
While the long-term implications remain uncertain, one thing is clear—DeepSeek has catalysed a new phase of competition in the AI industry, one that prioritises affordability, accessibility, and innovation over sheer spending power.
It is a moment that could redefine the future of artificial intelligence, compelling stakeholders across the globe to rethink their strategies and objectives.
Source
Explore more entrepreneurial insights and success stories at Inspirepreneur, your go-to magazine for business innovation and leadership.