Global stock markets sank on Monday after China responds harshly to AI tools such as ChatGPT and DeepSeek. A new AI utility called DeepSeek, built at a fraction of the cost and with much less energy than its American counterparts, has been downloaded more than its US app store rivals. According to some, this innovation is regarded as a large disruptor of existing AI models, with worry of its effect on the industry.
As is well documented in the tech and energy sector globally, DeepSeek’s emergence into the market — which boasts similar capabilities to older, more well-established models like ChatGPT but with a much smaller energy footprint — has raised alarm bells. Nvidia, which doesn’t publish earnings, registered by far the worst numbers in money lost, as stock prices were among the hardest hit during Monday’s trading. Nvidia stock sank 16.5% and erased $600 billion from its market cap. Nvidia’s drop contributed significantly to broader tech stock losses, and the tech-heavy NASDAQ index lowered by 3.1 per cent, slumping to 19,342 points.
A major part of the reason for the deepening sell-off is the fear that cheap energy-efficient alternatives stood the chance of denting demand for energy-intensive AI infrastructure like DeepSeek. This has also caused analysts to warn that the market could see more volatility, especially in heavily AI and chip-reliant sectors.
DeepSeek’s rise is a win for the Chinese tech industry, but the result is also unlikely to have a positive effect on stocks and technology companies around the globe. The demand for energy-hungry servers and chips of artificial intelligence may drop as cheaper AI options become available, which would further hit companies like Nvidia, whose hardware has led AI operations. And the news has rippled out further: the ripple effect has widespread investors and analysts alike bracing for further market fluctuations.
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