Nvidia shares and Microsoft share prices remain steady following DeepSeek AI App shock
Peter Hoskins & Charlotte Edwards
Business reporters, BBC News
Getty Images
US tech stocks were steady on Tuesday after they slumped on Monday following the sudden rise of Chinese-made artificial intelligence (AI) app DeepSeek.
Shares in chip giant Nvidia rose by 8.8%, having slumped on Monday, as experts said the AI selloff may have been an over-reaction.
The market hit came as investors rapidly adjusted bets on AI, after DeepSeek’s claim that its model was made at a fraction of the cost of those of its rivals.
Analysts said the development raised questions about the future of America’s AI dominance and the scale of investments US firms are planning.
US President Donald Trump described the moment as “a wake-up call” for the US tech industry, while also suggesting that it could ultimately prove ” a positive” for the US.
“If you could do it cheaper, if you could do it [for] less [and] get to the same end result. I think that’s a good thing for us,” he told reporters on board Air Force One.
He also said he was not concerned about the breakthrough, adding the US will remain a dominant player in the field.
Optimism about AI investments has powered much of the boom in US stock markets over the last two years, raising fears of a possible bubble.
DeepSeek has become the most downloaded free app in the US just a week after it was launched.
Its emergence comes as the US has been warning of a tech race with China, and taking steps to restrict the sale of the advanced chip technology that powers AI to China.
To continue their work without steady supplies of imported advanced chips, Chinese AI developers have shared their work with each other and experimented with new approaches to the technology.
This has resulted in AI models that require far less computing power than before.
It also means that they cost a lot less than previously thought possible, which has the potential to upend the industry.
Nvidia – the company behind the advanced chips that dominate many AI investments, that had seen its share price surge in the last two years due to growing demand – was the hardest hit on Monday.
Its share price dropped by roughly 17% on Monday, wiping almost $600bn (PS482bn) off its market value. Its share price dropped by 17% on Monday, wiping out almost $600bn (PS482bn) of its market value. It is expected that many companies will benefit from the lower cost of AI models, including Apple.
It could also be a boon for other tech giants, which have faced scrutiny for their high spending on AI.
Trump: DeepSeek AI release should be ‘wake-up call’ for US
Following the shock to markets in the US on Monday, the main indexes were steady.
In New York, the Dow Jones Industrial Average closed 0.3% higher, the S&P 500 rose by almost 1% and the tech-heavy Nasdaq gained 2%.
The FTSE 100 stock index of the UK’s biggest publicly-listed companies was also steady on Tuesday, closing 0.35% higher.
Earlier shares in Japanese AI-related firms including Advantest, Softbank and Tokyo Electron fell sharply, helping to push the benchmark Nikkei 225 down by 1.4%.
Several other markets in Asia were closed for the Lunar New Year holiday. The Mainland China financial markets will close on Tuesday, and reopen 5 February. The 40-year old, a graduate in information and electronics engineering, founded also the hedge fund which backed DeepSeek. He was seen recently at a meeting of industry experts with the Chinese premier Li Qiang. In an interview with The China Academy in July 2024, Mr Liang expressed his surprise at the response to the earlier version of his AI. “We did not expect that pricing would be such a sensitive topic,” he said. “We simply followed our own pace and calculated costs to set prices. “
After DeepSeek-R1 was launched earlier this month, the company boasted of “performance on par with” one of OpenAI’s latest models when used for tasks such as maths, coding and natural language reasoning.
DeepSeek’s technology has been praised by high profile figures including OpenAI chief Sam Altman who called it “an impressive model, particularly around what they’re able to deliver for the price”, though he added that OpenAI would “obviously deliver much better models” moving forward.
“DeepSeek’s ability to rival US models despite limited access to advanced hardware demonstrates that software ingenuity and data efficiency can compensate for hardware constraints,” said Marina Zhang, an associate professor at the University of Technology Sydney, who focuses on China’s high-tech industries.
Ion Stoica, co-founder and executive chair of AI software company Databricks, told the BBC the lower cost of DeepSeek could spur more companies to adopt AI in their business.
“If that happens, this reduction in cost can accelerate the progress of AI,” he said. The market will expand and grow faster. The Chinese company claims that its model can only be trained using 2,000 chips, compared to 16,000 estimated for other models. Elon Musk, the tech mogul, has questioned some of DeepSeek’s claims. He responded to a tweet that claimed DeepSeek had around 50,000 Nvidia processors that were now banned from exporting to China by saying “Obviously. “
The sudden surge in popularity has led some to express concerns about cyber security.
