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Home Technology

US Faces $1 Trillion Loss After Launch of Deepseek

TechX Editor by TechX Editor
January 29, 2025
in Technology, TechX World
Reading Time: 5 mins read
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US Faces $1 Trillion Loss After Launch of Deepseek

On Monday, U.S. stock markets saw a massive $1 trillion loss in market capitalization as a result of a sell-off sparked by the release of an AI model by a Chinese startup. DeepSeek, an artificial intelligence application, quickly became a central focus for traders, leading to a sharp decline in tech stocks. The market turmoil raised alarms, particularly in the chip sector, where losses were felt across major companies.

Table of Contents

Toggle
  • DeepSeek’s Impact on U.S. Stock Markets
  • Losses Pile Up in the Tech Sector
  • Nvidia Takes the Worst Hit
  • The Impact on Other Chipmakers
  • DeepSeek’s Rise on the App Store
  • Stock Market Snapshot at Close
  • Broader Impact on Tech Giants
  • International Markets React to DeepSeek
  • The Rise of China as a Competitor
  • Analysts Weigh in on the Future of U.S. Tech
  • Conclusion

DeepSeek’s Impact on U.S. Stock Markets

The debut of DeepSeek, a new AI model from China, had a profound effect on U.S. stock markets. The launch came as a shock to traders who had expected U.S. companies to remain ahead in the AI race. DeepSeek was said to outperform existing models, including OpenAI’s ChatGPT, in several benchmark tests. This news sent U.S. tech stocks into a tailspin, with investors reacting swiftly.

Losses Pile Up in the Tech Sector

The U.S. tech sector was hit hard, with market values plunging throughout the day. By the close of trading, the S&P 500 had fallen by nearly 1.5%, and the Nasdaq Composite lost more than 3%. The tech-heavy nature of the Nasdaq meant that it was especially vulnerable to these steep declines, as investors fled to other sectors in search of safer options.

Nvidia Takes the Worst Hit

Nvidia, one of the biggest chip manufacturers globally, saw the most significant losses, with its stock plummeting by almost 17%. This drop wiped out $589 billion in market capitalization and marked the largest single-day loss in the company’s history. The massive decline caused Nvidia to lose its position as the world’s most valuable company, falling behind Apple, which saw a 3% gain.

The Impact on Other Chipmakers

Nvidia’s fall triggered a ripple effect in the chip sector, impacting other major chipmakers. Broadcom’s stock plunged by 17%, while Taiwan Semiconductor Manufacturing Company (TSMC) saw a 13% drop. These declines reflected growing investor concerns over the ability of U.S. chip companies to compete with DeepSeek’s advancements, which were seen as a serious challenge to their dominance in the AI space.

Also Read: DeepSeek Unveils Janus-Pro, Promising to Surpass OpenAI’s DALL-E 3

DeepSeek’s Rise on the App Store

DeepSeek’s presence continued to grow after it became the most downloaded app on the Apple App Store in the U.S. on Monday. The AI model’s rapid rise to prominence added fuel to the market’s fear that U.S. tech companies were no longer the global leaders in artificial intelligence. As more users turned to DeepSeek, traders became more uncertain about the future of U.S. firms in the AI race.

Stock Market Snapshot at Close

By the close of trading on Wednesday, U.S. stock indexes were mixed, with the S&P 500 and Nasdaq Composite continuing to reflect the strain caused by DeepSeek’s release. The S&P 500 was down by 1.46%, while the Nasdaq saw a more significant drop of 3.07%. The Dow Jones Industrial Average managed a small gain of 0.65%, but it was the tech sector that dominated the negative sentiment.

Broader Impact on Tech Giants

Other major tech companies, including Microsoft and Alphabet, saw notable losses as well. Microsoft dropped by 2%, while Alphabet saw a 4% decline. Oracle, a key player in the enterprise software market, experienced a nearly 14% drop in its stock price. This downturn reversed its earlier gains after a significant $500 billion deal involving President Trump and AI infrastructure.

International Markets React to DeepSeek

The international markets were also impacted by the release of DeepSeek. SoftBank, which had been part of a major deal involving Oracle, saw its stock fall by 8%. The deal, intended to bolster AI infrastructure, had been seen as a major win for U.S. tech, but the success of DeepSeek in outperforming U.S. models raised doubts about its long-term viability.

The Rise of China as a Competitor

The launch of DeepSeek signals a potential shift in the global technology landscape. As China continues to develop its own AI capabilities, it may reduce its reliance on U.S. technology. Experts believe that attempts to limit China’s access to U.S. chips and technology may have motivated the country to pursue independent AI advancements. This could position China as a formidable competitor in the tech industry, threatening the current dominance of U.S. firms.

Analysts Weigh in on the Future of U.S. Tech

Analysts have begun to reassess the future of U.S. tech companies in light of DeepSeek’s emergence. Angelo Zino, a senior equity analyst at CFRA Research, stated that investors should take Chinese innovation seriously. He emphasized that DeepSeek’s success raises questions about the necessity of current capital expenditure and technology upgrades by U.S. companies, suggesting a potential shift in market priorities.

Conclusion

The launch of DeepSeek has undeniably shaken the U.S. tech sector, resulting in significant financial losses and renewed concerns about the future of artificial intelligence. As China continues to make strides in AI development, U.S. companies must adapt to the new competitive landscape or risk falling behind. This unprecedented market turmoil may serve as a wake-up call for the entire industry.

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