Nasdaq Falls 3 Percent as China’s DeepSeek AI Ignites Market Rout

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‘For now, the initial reaction is to sell first and ask questions later,’ said Jay Woods, chief global strategist for Freedom Capital Markets.

DeepSeek, a Chinese artificial intelligence (AI) app that soared to the top of the U.S. App Store and overtook OpenAI’s ChatGPT, flooded the financial markets with red ink at the Jan. 27 opening bell.

The tech-heavy Nasdaq Composite Index declined by 3 percent to kick off the trading week. The S&P 500 declined by nearly 2 percent, while the blue-chip Dow Jones Industrial Average shed about 100 points.

Dow Jones Market Data projects that the market rout erased more than $1 trillion in value in early trading.

Investors were rattled by the Chinese tech startup for its efficient and cost-effective open-source AI models. The company, founded in 2023, constructed models—DeepSeek-V3 and DeepSeek-R1—that outperform premier models from Google, Meta, and OpenAI on tasks such as coding, mathematics, and natural language reasoning.

This sparked fears across the markets because DeepSeek’s models appear to be developed at a fraction of the cost, using less energy and fewer employees.

Wall Street and Silicon Valley might be rethinking their calculations, says Giuseppe Sette, the president of AI market research company Reflexivity. This could have vast implications for industry titans such as Nvidia, various semiconductor businesses, and even the energy sector.

“DeepSeek has taken the market by storm by doing more with less,” Sette told The Epoch Times. “In layman’s terms, they activate only the most relevant portions of their model for each query, and that saves money and computation power. This shows that with AI, the surprises will keep on coming in the next few years.”

Looking at the Financial Markets

Nvidia fell by about 11 percent, Broadcom declined by nearly 12 percent, and Marvell Technology slumped by close to 14 percent.

Several other chip stocks declined, including Advanced Micro Devices (down 4 percent), Super Micro Computer (down 6 percent), and ASML Holding (down 7 percent). Additionally, Oracle, a major player in the software industry, dropped by more than 8 percent.

According to Mark Klein, CEO of SuRo Capital, DeepSeek could reduce demand for Nvidia chips and impact the company’s sales. Klein said its cost-effective measures could also stimulate demand for hardware.

By Andrew Moran

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