China’s DeepSeek, a low-cost AI chatbot, launched last week and quickly became the most downloaded free app in the US, rattling tech stocks and triggering market declines, the BBC reported.
Nvidia and other AI-linked tech giants, including Microsoft and Google, faced sharp declines on Monday following DeepSeek’s rapid emergence. Nvidia alone saw its market value plunge by over 16%. DeepSeek’s ultra-low development costs challenge America’s AI dominance, sparking concerns over the future of US leadership and the scale of upcoming industry investments.
DeepSeek runs on the open-source DeepSeek-V3 model, which its researchers claim was trained for just $6 million — a fraction of the billions spent by competitors. However, this claim is disputed within the AI community. Researchers attribute the chatbot’s low costs to leveraging existing technology and open-source code, which can be freely used, modified, or distributed.
DeepSeek’s rise comes amid US restrictions on advanced AI chip exports to China. In response, Chinese AI developers have collaborated, sharing research and exploring alternative approaches to sustain progress despite limited access to imported chips.
‘This idea of a low-cost Chinese version hasn’t necessarily been forefront, so it’s taken the market a little bit by surprise,’ said Fiona Cincotta, senior market analyst at City Index.
‘So, if you suddenly get this low-cost AI model, then that’s going to raise concerns over the profits of rivals, particularly given the amount that they’ve already invested in more expensive AI infrastructure,’ she added.
But Wall Street banking giant Citi warned that while DeepSeek could challenge US leaders like OpenAI, obstacles facing Chinese firms may hinder their long-term growth.
‘We estimate that in an inevitably more restrictive environment, US access to more advanced chips is an advantage,’ analysts said in a report.
Last week, OpenAI joined a group of firms pledging $500 billion (£400bn) to build AI infrastructure in the US. President Donald Trump, in one of his first announcements since returning to office, called it “the largest AI infrastructure project in history”, aimed at securing “the future of technology” in the US.
In response, the Bank of China announced a large-scale programme to support the development of artificial intelligence (AI). Investments will total 1 trillion yuan (around $140 billion) over five years.