Investing.com -- U.S. markets tumbled last week's following the rise of Chinese AI chatbot DeepSeek, which became the most downloaded free app on Apple’s U.S. App Store. The news rattled investors, questioning the dominance of U.S. tech giants in the AI space.
The S&P 500 fell 1.5%, while the Nasdaq plunged over 3%. NVIDIA (NASDAQ:NVDA) saw a record-breaking 17% drop, erasing $589 billion in market capitalization amid concerns its high-priced GPUs may not be as indispensable as once believed.
DeepSeek’s developers claim their AI was trained for just $6 million—an astonishingly low figure compared to billions spent by rivals. Skeptics, however, suggest these costs might be understated and note potential reliance on U.S. semiconductor technology, raising fresh export control concerns.
With DeepSeek restricting new signups amid a reported “malicious attack,” questions swirl over national security, user data privacy, and whether the U.S. might impose restrictions akin to those faced by TikTok.
"A number of analysts have already suggested that the claimed costs for training the model are likely bogus, and that it is very likely that DeepSeek has in fact relied on US chips that it wasn’t supposed to have and may not be able to access in the future," Rabobank said.
Meanwhile, tensions over trade with China intensified as Treasury Secretary Scott Bessent advocated for universal tariffs starting at 2.5%, while former President Donald Trump signaled additional levies on tech, steel, and pharmaceuticals.
As the U.S. considers stronger measures to counter China's advances, the global AI race is now in sharp focus, underscoring geopolitical and economic bifurcation.